In China, Alaska gets new gasline partners — but no guarantees

Alaska Gasline Development Corporation President Keith Meyer, Alaska Gov. Bill Walker and Department of Natural Resources Commissioner Andy Mack discuss meetings with potential buyers of Alaska’s LNG during a press conference on Friday, Sept. 30, 2016 in Anchorage. Walker and Meyer signed an agreement in Beijing to partner with three China-owned entities to advance the project. (Photo by Rashah McChesney/Alaska’s Energy Desk).

Alaska will stay in the lead and continue writing the checks on its gasline megaproject.

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But Alaska Gov. Bill Walker and state gasline corporation head Keith Meyer say they are encouraged by a deal they signed in Beijing.

As U.S. President Donald Trump and Chinese President Xi Jinping looked on, Alaska’s trade delegation signed an agreement with a China-owned oil giant Sinopec, in addition to one of the country’s banks and a sovereign wealth fund.

Meyer said the state had been trying to woo companies in China for six months.

“We’ve been through the courtship, we are now engaged,” Meyer said.

The deal links Alaska’s gas pipeline project to Sinopec as a potential buyer, The Bank of China as a potential lender and the Chinese Investment Corp, a sovereign wealth fund, as a potential investor.

An estimated $250 billion in deals and agreements were signed during Trump’s visit to China this week. This is among the largest.

For now, Meyer said Alaska will stay in control of the project — and the state hasn’t asked for any financial help from its new partners. He said the states aims to hammer out a final agreement in a little over a year.

Alaska wants a final investment decision by 2019 so it can break ground and bring the project online by 2025.

Some analysts said that schedule may be too ambitious.

Kerry-Anne Shanks, head of Asia gas and LNG research for Wood Mackenzie, an energy research and consulting company, said it will likely take a few years before the project is ready for a final investment decision.

Larry Persily, former federal pipeline coordinator for Alaska, said the agreement is non-binding and not much different than agreements the state has signed in the past.

“MOU’s, letters of interest, letters of intent — they’re made up names. They’re don’t mean anything, legally,” Persily said. “You could call it a joint development agreement or a MOU or a memorandum of cooperation. I look more at what’s underneath it.”

“Are they going to start paying a share of the development costs? No. Well, okay, that tells me they’re still holding back but they want to learn more.” Persily added.

Hugo Brennan, an Asia analyst for Verisk Maplecroft, wrote in an email that the deal is politically expedient.

“Its non-binding nature gives Sinopec the flexibility to quietly back away from the deal down the line. Beijing is mindful of the need to maintain varied commodity import routes,” Brennan wrote.

There are other hurdles ahead.

Alaska doesn’t control the gas. The top three producers on the North Slope — BP, ConocoPhillips and ExxonMobil — do.

Until last year, those three companies were partnered with the state in developing the pipeline. But they stopped pursuing the project and let the state take over. At the time, they cited unfavorable market conditions.

Even though their gas is crucial for a final project, Walker said they didn’t have much to do with the deal with China.

“This agreement is for an infrastructure project and the producers absolutely transitioned over to us in February of 2016,” Walker said. “So the producers don’t really have a role in the infrastructure portion of this. We’ll certainly continue to negotiate with them on the gas offtake, without question.”

Dawn Patience at BP wrote in an email that the company looks forward to understanding the terms of the agreement and the role envisioned for gas resource owners. Natalie Lowman at ConocoPhillips emailed that the company supports the state’s plan to try and push the project forward — and it intends to sell its gas.

At ExxonMobil, Aaron Stryk wrote in an email that the announcement from China could create opportunities to sell Alaska’s gas.

“We look forward to further discussions with the state and AGDC to understand the details of the announcement and progressing mutually agreeable terms for a gas sale and purchase agreement,” Stryk wrote.

The state’s gasline corporation has had an increasingly troubled relationship with Alaska’s legislature, which funnels money into the corporation and the project.

Last year, lawmakers in the House and Senate attempted to defund the agency and cut its budget. They also have repeatedly asked for more information and transparency from the state-run project.

Sen. Cathy Giessel, R-Anchorage, who heads the powerful Senate Resources Committee, said she still needs more details.

“I take the role, in this scenario, of a loan officer at a credit union,” Giessel said, “and you come to me with this great idea with lots of backup, and my answer to you is, ‘boy that sounds like a great idea — I’m going to dig into the details and we’ll talk again.’”

After the announcement and a closed-door briefing Wednesday, some lawmakers sounded more optimistic.

Rep. Geran Tarr, D-Anchorage,  said the deal is a positive step. Tarr heads the House Resources Committee, and while she said she is encouraged, she’s not sure the deal is enough to convince the legislature to funnel more money into the gasline corporation.

“I think at this point the feeling in the legislature is the remaining $70-80 million is what AGDC has to work with to get to a decision point,” Tarr said.

A substantive deal on the state-run gasline project could be a game-changer for Alaska’s struggling oil-based economy. The pipeline would cost at least $43 billion dollars to build and its construction would temporarily add thousands of jobs to the state’s economy.

The more than 800-mile-long pipeline would connect two oceans, piping LNG from Prudhoe Bay to the Kenai Peninsula before it’s loaded onto tankers and shipped it to Asia.

Rashah McChesney is a photojournalist turned radio journalist who has been telling stories in Alaska since 2012. Before joining Alaska's Energy Desk , she worked at Kenai's Peninsula Clarion and the Juneau bureau of the Associated Press. She is a graduate of Iowa State University's Greenlee Journalism School and has worked in public television, newspapers and now radio, all in the quest to become the Swiss Army knife of storytellers.

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