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AK-China Gas Inc.?

oil

Tongues were wagging all over Alaska Tuesday thanks to four words in a Monday update of a Bloomberg News story about President Donald Trump’s planned trade mission to China.

The four words? Alaska Gasline Development Corp. 

The story didn’t offer much more than that, reporting only that “among the companies tentatively listed as working on China-related deals in conjunction with the trip, according to a government document obtained by Bloomberg News, are General Electric Co., Honeywell International Inc., Westinghouse Electric Co. , Alaska Gasline Development Corp., the Boeing Co. and Qualcomm Inc.”

But that was enough, given that Keith Meyer, Gov. Bill Walker’s half-million-dollar point man on liquified natural gas has been reported to be in China all week.

Still, the story was marked with more speculation than the question of who doped the dog-team of four-time Iditarod Trail Sled Dog Race champion Dallas Seavey from Willow. Some of the gassiest rumors were tantalizing.

One had Sinopec, the Chinese national petroleum company, putting up $45 billion to be matched by $15 billion from the Alaska Permanent Fund, to fund construction of the long-awaited Alaska gas pipeline – Walker’s decades-long dream.

Nobody official was saying anything, and how the Chinese would recover their investment if such a deal were ever to take place was unclear, although the state has talked of creating a tax-exempt Alaska authority to run a company that would build the 800-mile pipeline from the North Slope to tidewater on Cook Inlet, and then charge a tariff to use it to ship gas south for liquefaction and eventually sale in Asia.

Expensive project

The project has been estimated to cost $45 billion to $65 billion dollars. If it were to come to pass, it would be China’s first big play in the North American petroleum business, though the godfather of “state capitalism” have been busy elsewhere.

The country is the leading financier of infrastructure projects in Africa, where Chinese companies are heavily involved in construction.

“The 2015 Africa construction trends report says that infrastructure projects valued at $375 billion U.S. were at different stages of implementation across the African continent,” the website allAfrica.com reported last year. 

China has been in the process of trying to trim its use of coal for energy. About 60 percent of the country’s energy now comes from coal, which blankets  many Chinese cities with pollution.

New China News Agency, the official organ of the Chinese government, notes “gas projects with Russia, Myanmar, and Central Asian countries” are already underway and “more import projects will be initiated.”

Whether any of this means anything for Alaska remains to be seen.

Suzanne Downing took a look at some of the progress made in moving toward pipeline construction in a story at MustReadAlaska.com, headlined “Alaska Gasline, China, and Walker’s ultimate Hail Mary pass.” 

“Alaskans can expect a big announcement in the next few days,” she predicted.

Against this backdrop, the Walker administration’s Tuesday rollout of a climate change leadership team and an “Alaska Climate Change Strategy” looked almost like it might be a smokescreen to hide bigger goings on.

Lt. Byron Mallot, who is to chair the team, said the goal of that group is to shift Alaska from a petroleum economy to a renewable energy economy, a tough assignment for the nation’s only Arctic state.

The lack of winter sun north of the Arctic Circle rules out solar cells, and frozen streams and rivers create problems for hydropower. The winds still blow to spin turbines, but they don’t always blow reliably.

The Chinese face similar problems, and thus their interest in natural gas. But an Alaska gas deal is complicated. The major oil companies – BP, ExxonMobil and ConocoPhillips – hold the gas leases, and what kind of price they’d be willing to accept for the gas is unclear.

And though the state has claimed $2 billion per year in state taxes and royalties on a gas pipeline, there are questions as to how accurate that claim and how exactly revenues would be divided between the state and local governments that will shoulder the anticipated social costs of pipeline construction if it ever happens

Alaska came to resemble the Wild West during the construction of the oil pipeline in the mid-1970s. The late author Joe McGinnis caught a lot of the chaos in an aptly named, best-selling book titled “Going to Extremes.”

And if all this were not enough, some wonder how the Committee on Foreign Investment in the United States might view a Chinese mega-energy project in the Alaska. The committee has the power to stop foreign investment if it finds them a threat to national security, and energy has long been considered a big national security issue.

 

 

 

 

 

 

 

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8 replies »

  1. Mr. Medred

    Thank you for your most informative articles! By the way Joy Huntington is my daughter, the one being stalked by Jerad Harrison. What is in the Joint Development Agreement signed by AGDC, Sinopec, CIC Capital Corporation and Bank of China? Does this guarantee Alaska will finally get a gas line?

    Thank you again.

    Dorothy Shockley

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  2. the CFIUS can only recommend actions to the Trump. Only the president can block a business deal under CFIUS. That’s why it is dumb to blame clinton for the uranium deal…she was a member of the CFIUS when the Russian company sought to purchase an interest in a Canadian company which owned a 20% interest in US uranium mining licenses but only Pres Obama had the power to approve or block the deal.

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  3. Bill Walker’s unprecedented press release will be coming soon. No doubt China’s interest is unprecedented. And the excitement for this LNG project is at an unprecedented new height (according to Kevin Meyer). Alaskan’s excitement and media excitment should also be at unprecedented levels right now (or Alaska is an unprecedented party pooper according to Kevin Meyer). This is going to be so good that Walker’s favorite word, ‘unprecedented, can not be used enough. Unprecedented! Unprecedented! No contract or financial commitment for the gas line to nowhere … but unprecedented! Ah, feels so good to say that word … “unprecedented”!

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  4. Begs the question of why then did SINOPEC walk away from its investments in Canada? The oil pipeline to Kitimat, BC, the LNG terminal that has been on again off again . . . therefore, if the LNG market is down, because natural gas is cheaper, and it is–LNG delivered to Japan is now at $8.35/MMbtus.
    So, how is China, which has its own internal money problems going to buy all of this gas, and pay for the pipeline to boot?
    Sending our oil and gas to China is not a good idea.
    When someone says that they will whack you with a nuclear weapons, one needs to pay attention. China has had a first strike policy since the Clinton Administration.
    Further, economically, China is a paper tiger that is dangerously close to an internal collapse. China’s internal debt from bad loans is admitted at $32T, but is suspected to be as high as $60T. The provincial banks are all over extended and loaded with bad loans due to corruption on a scale only dreamed about by Hillary Clinton.
    No, this is ignoring reality.
    China will not pull the irons out of Alaska’s fire.
    Where is the pay back?

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