China's President Xi Jinping on hand for the signing of an agreement related to the LNG potential in Alaska, heralded by the state's government as a new source of economic growth. File photo by Stephen Shaver/UPI | License Photo
Nov. 9 (UPI) -- A Chinese energy company, Sinopec, said it may be interested in looking at whether or not it can buy liquefied natural gas from Alaska on a regular basis.
Alaska's state government and the Alaska Gasline Development Corp. signed an agreement with Chinese lenders and China Petrochemical Corp., or Sinopec, to advance discussions on the LNG potential in Alaska. The agreement was signed in the presence of U.S. President Donald Trump and Chinese President Xi Jinping.
An LNG project in the design phase in Alaska would connect a natural gas reservoir in Prudhoe Bay through 800 miles of pipe to a liquefaction plant on the southcentral Alaskan coast.
"Sinopec is interested in the possibility of LNG purchase on a stable basis from Alaska LNG," Sinopec stated.
Chinese demand for LNG is on pace to grow by about 30 percent from last year by 2020.
Kerry-Anne Shanks, the head of Asia gas and LNG research at consultant group Wood Mackenzie, said Alaska's LNG prospects are still in the early stage of development, with a few years to go before planners even make a final investment decision.
"Wood Mackenzie classifies it as speculative, which means the commercial structure and marketing plan are not yet clear," she said in an emailed statement.
Hugo Brennan, an analyst on Asia for Verisk Maplecroft, was more direct.
"This kind of commercial agreement allows Trump to portray himself as a master dealmaker, while distracting from a lack of progress on structural reforms to the bilateral trade relationship," he said.
Both analysts said cost may be an impediment to the arrangement, noting that China could secure LNG from cheaper reserves closer to home, notably from Australia or Qatar, which already have established LNG infrastructure.
Russian independent gas producer Novatek reached an agreement with a Chinese bank to help implement an Arctic LNG project last week.
Nevertheless, Alaska Gov. Bill Walker was optimistic about the prospects of the deal. His state has already cut 44 percent from its spending obligations over the last four years and tapped into more than $14 billion from savings. With oil prices low by relative standards, he said the state needed to find new sources of revenue to pay the salaries of teachers and police officers.
With all major parties at least agreeing on direction, the governor said the LNG plan was a "big project" with "big benefits.
"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," he said in a statement.