A decision by the U.S. government to block the $1.2 billion Chinese purchase of MoneyGram might have concerned those hoping for a far bigger pile of Bejing cash to finance construction of an Alaska natural gas pipeline, but an authority on Asian investment doubts there will be any need for the Committee on Foreign Investment in the U.S. (CFIUS) to confront the financing of the 49th state’s long-awaited pipe dream.
Unfortunately, that’s because economist Derek Scissors is of the belief that a Chinese offer of willingness to consider a $44 billion investment in Alaska is just so much gas. Scissors is a resident scholar at the American Enterprise Institute, the chief economist of the China Beige Book, and the author of the China Global Investment Tracker.
“I seriously doubt the investment occurs at anything like the scale advertised,” he emailed in response to questions from craigmedred.news on Friday.
Memorandums of understanding (MOUs) with China companies outlining $43 billion in backing for the Alaska pipeline project and $83.7 billion for shale and other gas developments in West Virginia comprised more than half of a $250 billion deal President Donald Trump heralded after talks with the Chinese in early November.
“…Trump can return to the United States claiming to have snagged over $250 billion in deals from his maiden trip to Beijing,” Reuters reported at the time. “Whether those deals live up to the lofty price tag is another question altogether.”
Scissors went further Friday.
“Both the AK and the WV announcements are largely fake,” he said.
Scissors is not the first to suggest that the MOUs for natural gas development inked with the states of Alaska and West Virginia aren’t worth much more than the paper on which they were written.
“….Most of these deals are little more than expressions of interest, others relate to projects that were already underway,” wrote Stephen Vines, “and helping to contribute to this impressive total are deals amounting to little more than aspirational arrangements with only a slender chance of being realised.”
Other media have offered similar views. A Bloomberg News report was headlined “Trump’s $250 Billion China Haul Features Little of Substance.”
“One of the larger deals was a joint development agreement to advance a liquefied natural gas project in Alaska, involving the state-run Alaska Gasline Development Corp. (AGDC), Sinopec, the China Investment Corp and the Bank of China,” the story said, “the project, which Alaska has pursued for years, would involve total investment of up to $43 billion.
“In a joint statement announcing the deal, Sinopec said its ‘interested in the possibility of’ purchasing LNG from Alaska. A Chinese official said the MOUs merely show China’s goodwill toward Trump, and would take years of negotiations to become real contracts.”
If they become contracts.
Media in West Virginia and Alaska weren’t nearly so skeptical as Reuters or Bloomberg.
“West Virginia has a $83.7 billion investment agreement in place with a China-owned energy company for shale gas and chemical manufacturing projects in the state over the course of 20 years,” reported the Pulitzer-winning Charleston Gazette-Mail, although all the Mountain State had in place was an “understanding,” a promise of a possible future investment if everything worked out the way the Chinese wanted.
Alaska got the same let’s-all-agree-to-talk deal, but it was hard to tell from the pronouncement that came out of the Office of Gov. Bill Walker.
“PRESIDENTS TRUMP AND XI WITNESS HISTORIC SIGNING OF JOINT DEVELOPMENT AGREEMENT FOR ALASKA LNG,” proclaimed the governor’s press release.
Alaska media grabbed the pronouncement and ran with it as if the promise of a possible future deal was actually a deal.
“Alaska gas line agency reaches deal with Chinese oil company, financial institutions,” headlined the Anchorage Daily News.
“China backs landmark LNG pipeline deal with Alaska,” was the Fairbanks Daily News-Miner version.
There was in this coverage faint echoes of former Alaska Gov. Sarah Palin’s words to the Republican National Convention when she accepted the party’s vice-presidential nomination in 2008:
“I fought to bring about the largest private-sector infrastructure project in North American history. And when that deal was struck, we began a nearly $40 billion natural gas pipeline to help lead America to energy independence.
“That pipeline, when the last section is laid and its valves are open, will lead America one step farther away from dependence on dangerous foreign powers that do not have our interests at heart.”
Palin’s project was a pipeline of hopes and handshakes, of could bes and might bes, that never turned a single shovel of dirt. Her successor in office, Alaska Gov. Sean Parnell was left to try another approach.
He signed an MOU with the pipeline company TransCanada and Foot Hills Pipelines to begin consideration of a pipeline from the Prudhoe Bay on the edge of the Arctic Ocean across Alaska to tidewater at Cook Inlet.
His MOU eventually developed into an agreement for the state, ExxonMobil, BP and ConocoPhillips – three of the largest independent oil companies in a world where national companies largely control the oil business – to work together in an effort to make real the gas line of which Alaska has dreamed since the 1960s.
ExxonMobil was put in charge. Exxon is the fifth largest oil company in the world. The only companies in front of it are state-owned giants – Saudi Aramco, which has revenues 70 percent larger than Exxon; Sinopec; China National Petroleum Corporation; and PetroChina.
All the three companies behind Aramco are under the ultimate control of the Chinese government. And together they generate revenues more than two and a half times that of Aramco and more than four and half times that of Exxon, a privately owned Houston-based company.
The numbers, which illustrate the potential for China to exert a lot of influence on global oil and gas markets, underline why CFIUS has been monitoring the Alaska gas line issues, according to sources connected to East Coast financiers.
The state of Alaska has thrown in with Sinopec, the biggest of the Chinese majors. The state took over the pipeline project from Exxon in 2016, a company Walker truly does not like. One anecdote sums it all.
When Walker was working for the Alaska Gasline Port Authority, an almost two-decade-old Valdez and Fairbanks North Star Borough scheme to finance and build a pipeline, he was called to Exxon headquarters in Houston to talk gas.
As the governor tells it, he arrived in the Texas city, admired the impressive skyscraper then owned by Exxon, and went inside expecting a meeting with someone high up in the 44-story structure.
Instead, he has said, Exxon employees punched the button on the elevator “and took me to the basement.” He didn’t get a gas deal, either. And he’s never forgotten. It didn’t take him long in office to decide Exxon, which wanted to slow the Alaska gas line project and wait for markets to improve, needed to go.
Exxon was replaced with the AGDC. Walker hired a half-million-dollar, Texas gas man to head the agency. And the two of them along with a handful of other state officials started courting interests in Japan, Korea and China.
The big prize came when Walker, a one-time Republican turned independent and now viewed as more closely aligned with Democrats than his old party, managed to work his way into Trump’s China deal.
As a political manuever, this was no mean feat. Walker had been previously aligned closely with Trump’s predecessor Barack Obama thanks to a lot of help from good friend Alice Rogoff, the millionaire ex-wife or soon to be ex-wife (it’s unclear whether the divorce is final yet) of billionaire David Rubenstein, one of the richest men in the country.
It was a slick move by Walker.
But the big and lingering question for Alaska is whether the arrangement made with the Chinese means anything. And if it does, will CFIUS, which has been increasingly worried about Chinese investment in the U.S., let the Chinese buy into Alaska to solidify their position as the most powerful player in global oil and gas market?
Scissors, a global authority on this subject, doesn’t think there’s a chance the gasline will ever get that far, but one never knows.