Tokyo goes; LNG woes

Scratch Tokyo Gas as one of the candidates for the purchase of Alaska North Slope LNG.

 

A variety of sources are reporting the company, a major Japanese importer of liquified natural gas, is no longer looking for U.S. imports.

Only 11 months ago, the Alaska Gasline Development Corporation (AGDC) was trumpeting the company signing a letter of intent to purchase LNG from a hoped-for state gasline.

LNG World News in December quoted a then-optimistic AGDC president Keith Meyer, saying that the Tokyo Gas agreement “helps round out the sales volumes from the Alaska LNG project.”

The letter of intent was signed a few months after Gov. Bill Walker sat down for meetings and a photo op with Tokyo Gas President Michiaki Hirose and Tokyo Gas America President Shunjiro Yamashita.

But Tokyo Gas has since found other U.S. gas suppliers and is now looking to diversify sources elsewhere.

“The company has started receiving long-term U.S. LNG from Dominion Energy Inc’s Cove Point export plant in Maryland earlier this year, and it also has signed agreements to buy LNG from Cameron project in the United States,” Gas Processing & LNG.

“Following the recent agreements to buy LNG from Mozambique and Canada, the company is beginning to fill up the room for required gas volumes in the 2020s, and that it would look to diversify procurement conditions further by seeking non-U.S. LNG supplies” near Toyko gas president Takashi Uchida told reporters. Hirose now chairs the company’s board of directors.

Still Alaska hope

Japan is the globe’s largest importer of LNG, but demand in China is rising rapidly. Industry analysts says it appears to be the best hope for a deal on Alaska LNG, but the U.S.-China trade war has muddied the picture.

“The outlook for China’s natural gas imports has become cloudy since the country imposed a 10 percent tariff on LNG from the U.S. on Sept. 24, amid an escalating trade fight between Beijing and Washington,” the Nikkei Asian Review reported Sunday.

“China had hoped to import a lot of LNG from the U.S. in response to sharply rising domestic demand, and as a way to cut its trade surplus with the country….But as the trade war intensified, China reversed course.”

The state of Alaska does, however, remain partnered with the Bank of China and investment bank Goldman Sachs in trying to raise funds to finance the project estimated to cost $43 billion, and Walker, who first ran for office in pursuit of a decades-old dream of a gasline from the North Slope to tidewater, remains hopeful.

“In a presentation given this month at its board meeting, AGDC said it continues to have regular dialogue with Trump administration officials to avoid Alaska LNG being affected by the tariff, and that it expects current trade tensions to be resolved well before it starts exporting to China,” Stephen Whitfield reported for the Society of Petroleum Engineers magazine last week.

“AGDC leaders have also acknowledged that the 25 percent (U.S.) tariff levied on Chinese steel imports could affect the viability of sourcing some of the steel and other components for the pipeline, possibly adding between $250 million and $500 million to its cost, but the company said it has a contingency in its budget plan to handle such cost increases. The project’s $43-billion price tag makes it one of the most expensive LNG projects based in the U.S.”

Walker traveled to China with President Donald Trump less than a year ago to sign a deal with Sinopec – China’s giant, state-owned oil company – and other Chinese firms interested in Alaska gas and construction of the proposed, 800-mile pipeline and LNG facility in the 49th state.

The announcement of that gas deal “was made with fanfare as part of U.S. President Donald Trump’s state visit to China,” Reuters reported at the time.

Walker tried to cultivate Trump as a gasline ally after the 2016 election and appeared to enjoy early success as witnessed by the governors invite to China for Trump’s state meeting with Chinese President Xi Jinping in November 2017.

At the time, China Daily reported Trump “believed that cooperation between the United States and China would benefit the two sides, and bring peace, prosperity and security to the world.”

Only two months later, the mercurial president ordered tariffs on Chinese-made solar panels and washing machines. Tariffs on aluminum and steel followed. China accused the U.S. of starting a trade war and implemented its own tariffs on U.S. imported goods in July.

The war doesn’t seem to be easing. CNN reporters Steven Jiang and Ben Westcott in a Saturday analysis posted at CNN.com wrote of an “unprecedented deep chill.”

Though “Chinese President Xi Jinping may meet with Trump at the annual G20 leaders summit in Buenos Aires in November in an effort to broker a solution,” they reported, “policy experts on both sides worry it may already be too late to find a way back.”

The analysis suggested little likelihood for the softening of U.S.-China relations in the near term.

“In the US, where politics is now highly partisan, China has become an unlikely lightning rod that has united Republicans and Democrats — an amazing feat in Trump’s Washington,” Jiang and Westcott wrote.

“Across the political spectrum, government officials, academic experts and business leaders increasingly agree on the urgent need to shake up US-China relations, which they say have been lopsided for too long to China’s advantage – a point frequently made by Trump.”

Trump’s affections

Trump’s willingness to cut any sort of special deal to benefit far-off Alaska is an unknown although Sen. Dan Sullivan, R-Alaska, did convince the president to back off on U.S. tariffs on Alaska salmon shipped to China for processing and later imported into the U.S.

Sullivan has taken heat in the state for consistently trying to work with Trump. Fairbanks Daily News-Miner columnist Dermot Cole has labeled the senator “a tireless Trump cheerleader” and blasted him for  “his standard practice of never saying anything that might offend the president” and “pattern of obsequious behavior.”

Meanwhile, former-Republican turned independent Walker and running mate Byron Mallott, a Democrat, have taken to challenging the president as part of their re-election campaign. Both weighed in with opposition to Trump’s appointment of Brett Kavanaugh to the Supreme Court of the United States.

They categorized Kavanaugh as a threat to the “nation’s healthcare and labor laws” and said in an official statement that the justice could “jeopardize the Indian Child Welfare Act, Alaska Native Claims Settlement Act (ANCSA), and other laws that enable tribal self-determination due to his overly narrow view of the relationship between federal and tribal governments. Alaska is home to 229 tribes, nearly half of all tribes in our nation.”

Sullivan voted with the Republican majority that confirmed Kavanaugh’s appointment. Sen. Lisa Murkowski, R-Alaska – who with strong backing from Alaska Native corporations won a stunning, write-in re-election bid against the man who bested her in the 2010 Republican primary  – voted against Kavanaugh, but then withdrew the vote as a courtesy to another Republican senator who missed the vote to attend his daughter’s wedding.

The move assured Kavanaugh’s confirmation but angered Trump who called Murkowski’s decision to basically vote a non-declaratory “present” “really unacceptable,” according to The Hill.

Trump’s present thoughts on the 49th state, which could play a pivotal role in any action to free Alaska LNG from the weight of tariff restrictions, are an unknown.

While Walker and the AGDC remain publicly upbeat, the former director of the Federal Office for Alaska Gasline Projects, which once played a key role in efforts to find a way to move the gas on the North Slope to market somewhere, is less so.

“It looks like AGDC will run out of money about the end of calendar 2019,” Larry Persily said Monday, “unless it gets the state legislature to appropriate more funding or private investors to start writing checks. I would not bet on either one happening. I believe most legislators are skeptical of putting any more public money into the quest, and it’s hard to imagine private investors willing at this time to put their dollars into such a risky development.

“The escalating trade war between President Trump and China is a definite turn-off for private investment in the Alaska project, which…continues to face challenges in an increasingly price-competitive global LNG market.”

Still, Persily added that he believes it would be a foolish for the state to walk away from the project without completing the environmental impact statement (EIS) now underway.

As the situation stands today, the Federal Energy Regulatory Commission “is scheduled to release the final EIS in November 2019 and a decision on the application in February 2020,” he said. “If it takes a few million dollars more to get there, rather than walk away from the process just a few months shy of finishing the job, I’d think Alaska legislators would seriously consider a small appropriation.”

The Trump administration has backed efforts to develop U.S. oil and gas. That’s not necessarily guaranteed in the nation’s capital in the future. There is environmental opposition to the gasline.

The Center for Biological Diversity, which has a long history of trying to stop development projects in Alaska, has criticized Trump for rushing the project.

“It’s incredibly reckless for Trump to try to fast-track the biggest natural gas project in U.S. history,” an attorney for the organization told Salon’s Sarah Okeson earlier this month. “A proper review would show this risky venture endangers Alaska’s wildlife and deepens our dependence on dirty fossil fuels.”

Okeson described the gasline as threatening to accelerate climate change and help fuel Chinese manufacturing industries at the expense of U.S. businesses. If gas replaces the coal China now burns for fuel, however, it is thought to be a net positive for the environment. The jobs isssue is a complicated one that goes deep into the issues of cheap labor and automation.