Alaska and China sign $43 billion agreement to develop LNG pipeline, part of Trump’s war on the trade deficit

Alaska Gov. Bill Walker and AGDC head Keith Meyer sign a joint development agreement with China's state-owned energy company, banking and investment agencies to develop Alaska's natural gas prospects. (Screenshot of New China TV's coverage of the event.)

It’s a fair bit more than a non-binding MOU, but just how much more is unclear.

Alaska Gov. Bill Walker and his team will be bringing home an agreement with Chinese investors and energy companies to develop Alaska’s natural gas stores on the North Slope worth $43 billion. Walker and his gasline team have been traveling to Asia with President Donald Trump this past week.

The joint development agreement was signed in Beijing by Walker, Alaska Gasline Development Corporation head Keith Meyer and representatives from China’s state-owned energy company, Sinopec, and two of China’s financial investment firms. The financial investors are the Bank of China and the China Investment Corporation, which is China’s $813 billion version of the Alaska Permanent Fund Corporation.

“This agreement has all five necessary signatories—the buyer, the lender, the investor, the developer and the state,” Walker said in a prepared statement. “There are more steps before a final investment decision is reached, but having the largest LNG buyer in the world participating in this project means the Alaska LNG project has favorable market engagement at the highest level.”

The terms of the financing weren’t immediately available, but the announcement from AGDC describes it as follows: “Under the agreement, the parties have agreed to work cooperatively on LNG marketing, financing, investment model and China content in Alaska LNG, and get a periodic result by 2018.”

The language would suggest the group is taking a similar approach that Alaska and the major North Slope energy producers made on the Alaska Liquefied Natural Gas Project to take a “gated” approach that allows investors to cut and run at certain points in the project’s development, albeit all on a much faster timeline.

The existing AKLNG plan calls for an 800-mile pipeline connecting the North Slope and an export terminal in Nikiski along with the proper treatment facilities along the route. A update from February indicates the cost estimate of the project is between $37 billion and $45 billion, well within the reach of the proposed financing deal.

The road to tonight

Speculation swirled throughout the afternoon after Walker sent legislators a notice he’d be holding a 15-minute briefing on a secure phone line from Beijing to give an update on an unspecified issue. Because Walker attended the trip with the plan to pitch the gas project to Asia buyers (the Asia market has long been thought to be the target market for Alaska’s natural gas) speculation immediately went in that direction.

Confusion was sown by an afternoon announcement of trade agreements by the White House that included a non-binding agreement (a memorandum of understanding) between the Alaska Gasline Development Corporation signed with a Korean gas utility. Another non-binding MOU in a long list of non-binding MOUs did little to excite people long following Alaska’s fruitless efforts to build a gas line to accompany the trans-Alaska pipeline system, but late in the afternoon it became clear that the MOU was from earlier in the year and the likely announcement had to do with something else.

This time it’s a JDA

The first report emerged by Reuters early in the evening, giving Alaskans enough time to tune into a live video feed of a signing ceremony attended by Trump and China President Xi Jinping. Trump and Xi watched from the stage as the $43 million joint development agreement was signed alongside procurement agreements for  $1.4 billion in aircraft engine frameworks and $4 billion chipsets.

In his remarks Trump didn’t discuss the Alaska natural gas project directly, but he spoke broadly about fixing the trade deficit between the two countries.

“We will have a more prosperous future if we can achieve a level economic playing field,” he said. “Right now it is a very one-sided and unfair one.”

Then added a thoroughly Trump-style flair to an otherwise milquetoast speech.

“But, but, I don’t blame China,” he said, to laughs. “After all who can blame a country for being able to take advantage of another country for the benefit of its citizens? I give China credit.”

We’ll bring you more developments as they become available.

1 Comment on "Alaska and China sign $43 billion agreement to develop LNG pipeline, part of Trump’s war on the trade deficit"

  1. Carlton Russell | November 9, 2017 at 10:30 am | Reply

    Trump has given up the USA’s claim to world leadership to China. What next?

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