China LNG deal for real? Independent expert says yes, maybe

A China expert has been retained by the Legislative Affairs Council to give legislators an independent assessment of the hoped-for Chinese investment and purchasing deal being negotiated for Alaska lique ed natural gas. In presentations so far to state legislators Dr. Wenran Jiang of the University of Alberta, basically validates the potential for the pending deal and what Gov. Bill Walker and officials at Alaska Gasline Development Corp. have been saying about it.

But Jiang, who is also an advisor to the government’s Global Affairs Canada, also warned that China’s government and its big energy companies are not infallible and that big hiccups can happen. In fact, one occurred this winter in China (see more, later in this report). Jiang appeared before committees of the House and Senate Feb. 28.

He emphasized several key points:
Chinese companies have demonstrated a capacity to move quickly on strategic investments and are not afraid of committing large sums. In Yamal, for example, China moved in when U.S. companies withdrew due to Russia’s Ukraine adventure, and paid $12 billion cash for a stake in the $27 billion project, Jiang said, which saved the project. Chinese rms wound up building 80 percent of the project modules and other infrastructure, which represented about $15 billion in contract values, he said.
The Alaska deal ts into China’s strategic goals. The nation is increasingly dependent on imported oil and gas as urbanization continues in its economy, creating more middle-class Chinese who want to buy cars. China is now 70 percent dependent on oil imports and estimates are the dependence will reach 80 percent by 2014. Dependence on gas is similar. This is now of serious concern to China.
Diversi cation of its energy supply portfolio has a high priority, and Chinese officials do not want to be too dependent on pipeline gas from central Asia or Russia, although the Russians are keen to sell more gas to China to diversify their export markets away from central Asia. There is sensitivity on the Chinese side to supply disruptions, however. There was a disruption this winter in pipeline gas from central Asia during very cold weather and the Chinese suspect supplies were diverted en route.
China began its overseas investment drive a decade ago, focusing initially on South America and Africa. It is now looking to North America. Several big deals in Canada have stumbled, however, which now causes investors to be more cautious.
If Alaska is seen as a diversi cation of U.S. imports, avoiding an over-dependence on gulf LNG exporters, an Alaska deal ts nicely with another strategic Chinese move toward greater involvement in the Arctic. Chinese entities are already heavily invested in Russia’s Yamal Arctic LNG project.
LNG import capacity is being built rapidly as
a hedge against pipeline dependency, and while Australia, Southeast Asia and the Persian Gulf are major suppliers, China wants to diversify to North America as an LNG source. Canada’s LNG export projects are mired in local controversy, so growth in North American supply will be from the U.S.
The cautionary note Jiang voiced was that unexpected circumstances can upset even what seem thoroughly-planned and well-funded energy initiatives. A national mandate to convert from coal to gas was disrupted this winter by extreme cold weather and shortages of gas which caused the government to issue emergency orders to stop coal conversions and to change furnaces back to coal.
Jiang’s presentation to legislators can be seen at: https://www.360north.org/gavel/video/?clientID=2147483647&eventID=2018021322