China’s resales of Australian LNG strengthens case for prioritising domestic users

Yesterday, the Queensland government expressed concerns about its federal counterpart’s proposed domestic gas reservation policy, which would redirect some gas production from liquefied natural gas (LNG) exports to the domestic market in eastern Australia. It “warned against the focus on reallocating existing gas rather than encouraging new investment and supply.” 

IEEFA analysis has previously found that developing new supply would likely be too slow to help with forecast gas shortages. In addition, such an approach risks sending Australia’s cheapest gas to other countries, while domestic consumers contend with gas from expensive new fields such as the Narrabri and Beetaloo basins.

A recent IEEFA report adds a new lens to this issue, finding that China has been reselling large volumes of Australian LNG for a profit for the last five years. IEEFA estimated that China resold 17–19 million tonnes (Mt) of LNG in 2025 alone, sourced largely from the US, Australia and other global suppliers. This volume is roughly equal to China’s total LNG imports from Australia in 2025 (20.6 Mt). The estimated Chinese LNG resales from global suppliers are equivalent to 925-1,034 petajoules (PJ), or more than double eastern Australia’s domestic gas consumption of 481PJ in the same year (Figure 1).

More than 60% of Australia’s LNG exports to China come from Queensland, adding up to 12.7Mt in 2025. China is also the main destination of LNG exports from the state, representing more than half of exports in 2025. 

Figure 1: China’s estimated LNG resales, PJ, 2025

Source: IEEFA analysis based on ICIS, Kpler, BloombergNEF, Australian Energy Market Operator, media reports.

The resales are driven by a mismatch between China’s plateauing LNG demand and its growing contract portfolio. The top end of the estimate corresponds to the contracting surplus in 2025 – or the difference between total contracted volumes and actual LNG imports into the country. IEEFA estimates the surplus could reach almost 32Mt in 2026. 

Only part of those resales can be tracked via shipping data – those shipments carried by Chinese chartered vessels to other countries – representing just under half of the top end of the estimated total volume. IEEFA’s analysis suggests China resold an estimated 1.3Mt of Australian LNG on vessels chartered by Chinese companies, equivalent to 71PJ. In 2025, Australia was China’s largest source of flexible LNG contracts, with almost 11Mt of contracts providing the option to either meet Chinese demand or divert cargoes to other destinations.

If we extrapolate the share of Australian LNG in resales shipped in Chinese chartered vessels (15%) to the top end of the total resales estimates, this would equate to up to 160PJ of Australian LNG resold by Chinese companies (Figure 1).

Chinese buyers typically pay quite a low price for Australian LNG. Based on Australia government statistics, Chinese buyers paid AUD804/t LNG on average in 2023 (most recent data point), compared to AUD921/t LNG across all export markets. That is equivalent to about AUD15 per gigajoule (GJ) for Chinese buyers and AUD17/GJ across all export markets. 

Chinese companies are seemingly making a significant profit from reselling Australian LNG. Based solely on the arbitrage Chinese charterers earned by diverting Australian-sourced cargoes, IEEFA estimates that Chinese charterers have earned more than USD1.1 billion (equivalent to AUD1.6 billion) from reselling Australian LNG to other Asia-Pacific countries between 2021 and the first half of 2026 (Figure 2). 

2026 is expected to be the most profitable year yet, with about USD600 million (AUD860 million) in arbitrage earnings. Total profits could be much larger given that resales delivered by Chinese chartered vessels are likely to comprise about half of total resales.

Figure 2: Estimated profit from Australia-sourced resales by Chinese charterers, 2016 to 1H2026

Source: IEEFA analysis based on Kpler, ICIS.

China is not the only country onselling Australian LNG. Japanese government survey results suggest that Japanese companies onsold about 44Mt of LNG in FY2024, more than twice the estimated volume of resales from China. IEEFA found that 30% of trackable resales were supplied by Australian LNG. In total, Japanese onselling of Australian LNG was estimated to represent 598-756PJ in 2025, or between 1.2 and 1.7 times the domestic gas consumption in eastern Australia.

Japan is Australia’s largest buyer of Australian LNG, and China its second largest buyer. Together they represent more than 60% of LNG exports from Queensland and from the whole of Australia. Both countries resell large amounts of Australia’s gas, at least some of it at a profit. Therefore, it seems fair that Australian domestic users should be prioritised over LNG exports when it comes to benefiting from Australia’s cheapest gas sources.