Alaska has extended a deadline for Chinese companies to agree on LNG purchases and financing for the $43 billion Alaska LNG project, a spokesman for the state-owned Alaska Gasline Development Corporation said Thursday.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
If built, the project would export up to 20 million mt of LNG yearly, with 15 mt/year reserved for China in the deal now being discussed and 5 million mt/y to be available for other customers. AGDC is also in talks with potential buyers in Japan and Vietnam.
"The [Chinese] parties are actively engaged in negotiations and intend to reach a definitive agreement by June 30, 2019," said Jesse Carlstrom, spokesman for AGDC. This is a six-month extension from the original deadline of December 31, 2018, which was set in 2017.
Three Chinese firms -- Sinopec, Bank of China and China Investment Corporation -- and Alaska's AGDC have been in negotiations since November 2017, when the conceptual deal was agreed in Beijing in the presence of China's President Xi Jinping and US President Donald Trump, who was in China to meet Xi and sign trade deals.
Carlstrom said it was typical in negotiations on large energy projects to see deadlines extended, but he added that the current US-China trade "friction" has added complications. "The parties in China want to conclude a deal with Alaska to buy LNG," he said.
Another factor is a new state administration in Alaska, where Michael Dunleavy became governor Thursday, replacing former Governor Bill Walker, who had engineered the deal with the three Chinese companies.
During the campaign in 2018, Dunleavy was critical of a large LNG project led by the state, saying he preferred that private companies own and construct the project.
However, the new administration is withholding judgment "until the new administration can fully understand the costs, risks and potential benefits," Brett Huber, a senior policy adviser to Dunleavy, said in a statement.
Platts LNG Navigator brings together LNG news, insights, data and analytics, providing you with the most comprehensive LNG resource in the market. Click the link below for a free demo of LNG Navigator to learn more.Free Demo
Dunleavy had asked former Alaska Governor Sean Parnell to review the project as developed by Walker. Parnell said he advised Dunleavy to allow the project to proceed through the Federal Energy Regulatory Commission process now underway, even if there are further delays in the commercial agreements in China. The draft environmental impact statement is scheduled to be complete in February, and a FERC certificate is expected in February 2020.
Dunleavy has also included $22 million in his fiscal 2020 budget to keep work going on the FERC application even if the Chinese delay signing for purchases and financing.
"What's important now is getting something of value to the state for all the time and money invested," Parnell said. So far, Alaska has invested about $500 million over several years for engineering, environmental and regulatory work on the project.
State Senator Cathy Giessel, who chairs the senate's resources committee, said legislative leaders met with Parnell and strongly endorsed his recommendation that AGDC continue work on regulatory approvals even absent immediate customers for LNG.
North Slope producers BP, ConocoPhillips and ExxonMobil, which own the bulk of the 35 Tcf of gas reserves that have been confirmed on the slope, have invested a similar amount, much of it in a partnership with the state. In 2015, the companies opted not to invest further due to market conditions and leaving the state with an option to continue work, which Walker chose to do.
Since then, ExxonMobil and BP agreed on terms to sell gas from North Slope fields they control to the state's AGDC.
A similar sales deal is being negotiated with ConocoPhillips. The state itself controls substantial North Slope gas under its royalty and tax agreements, which could also supply gas to the LNG project.
The Alaska LNG Project includes an 800-mile, 42-inch diameter gas pipeline from the North Slope to a large LNG export plant at Nikiski, on the Kenai Peninsula near Anchorage in Southcentral Alaska.
-- Staff, email@example.com
-- Tim Bradner, firstname.lastname@example.org
-- Edited by Derek Sands, email@example.com