US will weaken the “Power of Siberia” due to the supply of liquefied gas from Alaska to China.
Recently, the situation on global energy markets has not favored LNG producers. The world is literally flooded with blue fuel, the prices of which have strongly “sunk” last year. Analysts believe that this is not the limit: the launch of new natural gas liquefaction facilities in different countries of the world will aggravate the imbalance between supply and demand.
Under these conditions, investors are no longer in a hurry to reap the benefits of the American shale revolution. Among the “frozen” projects was a complex of capacities for the production, liquefaction and transportation of natural gas from the rich fields of the northern slope of Alaska – Alaska LNG. So far, these capacities exist only on paper. It is likely that they will remain there. But judging by the latest publications in the Western media, the lobbyists of the project do not put an end to it. For Gazprom, this poses a threat of increased competition in China’s energy market.
The first reports on Alaska LNG appeared 7 years ago, and since 2015 they have taken up it thoroughly. By that time, state authorities had legislatively approved a plan for the construction of a pipeline with a length of 800 miles, through which gas from the northern slopes should be transported to the city of Nikiski (here it will be liquefied and delivered abroad).
Private investors joined in the discussion; the American Council on Capital Formation (ACCF) called the development of gas resources in Alaska the best way to develop the economy of the region.
- There is wide consensus that the path to Alaska’s economic progress passes through the remote northern slope of the state, which has huge natural gas reserves along the Beaufort Sea, – wrote the authoritative American magazine World Oil.
- Using these reserves will create tens of thousands of jobs and expand billions of dollars in Alaska’s revenue base.
The concern expects to cover losses from exports to Europe by raising prices for the population
However, the broad consensus did not help the lobbyists of the project. From year to year, they updated the calculations, created new presentations, consulted with local authorities, but still did not start implementing their ambitious plans.
Perhaps the root of the problem is precisely the big appetites that fuel the abundance of Alaska’s natural resources. According to American estimates, the northern slopes of the largest US state can produce 20 million tons of LNG per year. This exceeds the total production volumes of the Russian company Novatek for 2019.
Alaska LNG focuses specifically on 20 million tons annually – what’s the point of building a small plant when there are so many gas reserves under your feet? But there is a flip side to the coin: where to sell finished products? Only a small part of it will be used for domestic needs, and it is very difficult to find a place in the sun on foreign markets. The Americans still have no answer to the question of whether to invest tens of billions of dollars in a large-scale and dubious energy project.
Obviously, a prerequisite for the implementation of Alaska LNG is the conclusion of preliminary agreements with those who will import liquefied natural gas. As a potential “sponsor”, the Americans considered the Asia-Pacific region, where liquefied gas is in special demand.
In 2017, the United States managed to sign an agreement on the joint development of Alaska’s LNG infrastructure with China. The deal was made in the presence of Trump and Xi Jinping. The Chinese side claimed three quarters of the gas produced under the Alaska LNG. For the state authorities, this was a real triumph.
– There are several important steps to reach a final agreement, although the current agreement is already a breakthrough, all five necessary representatives have signed: buyer, borrower, investor, developer and state authorities, – said Alaska Governor Bill Walker.
Thus, the Power of Siberia got a new potential competitor.
Since 2017, Alaska LNG is considered exclusively with reference to the Chinese market (it is clear that without long-term agreements with Beijing, the project does not make sense). But the aggravated trade confrontation between the United States and the Celestial Empire, if not buried, postponed its implementation for an indefinite period. In response to the 25 percent duty that Trump has levied on more than three hundred items of Chinese goods, Beijing has imposed a margin on U.S. LNG.
Thus, the Americans lost access to the most promising gas market in the world. Automatically, many export-oriented projects in Asia were threatened with bankruptcy. And I had to forget about Alaska LNG.
In the middle of last year, the Americans refused to renew the already mentioned agreement with partners from China. This was announced by the interim president of Alaska Gasline Development Corp. (AGDC) Joe Doubler at a meeting of the Alaska House of Representatives Resource Committee. He honestly admitted that the US-China Alaska LNG project “no longer exists”: “There are many things that simply won’t happen.
– We would feel dishonest in renewing an agreement containing numerous provisions that cannot be applied to what we intend to do.
Recently, talk of investing in Alaska LNG has resumed again. And this is not surprising: the negotiations between the USA and China were crowned with success. The interim economic and economic agreement calls for the United States to return to the Chinese energy market. Beijing has pledged to increase purchases of LNG, oil, petroleum products and coal from the United States by more than $ 52 billion over two years.
– The purchase of energy worth $ 50 billion is great news for our people: today we are number one in the extraction of energy in the world, larger than Saudi Arabia and Russia, – Donald Trump boasted.
For Moscow, the first phase of the US and China trade deal has its advantages. According to experts, it will help stabilize gas prices: American LNG, which poured into Europe after the introduction of Chinese duties, will return. In the western direction, Gazprom will have fewer competitors. But plans to increase energy exports to China naturally come into question.
In the near future, China, obviously, will not be able to significantly reduce the import of gas and oil from Russia (the terms of cooperation are spelled out in long-term contracts). But there is no need to talk about the second thread of the “Power of Siberia”.
The end of the U.S.-China trade war revives Alaska LNG lobbyists. According to S&P Global Platts, an American news agency specializing in hydrocarbon markets, Alaska is still working on this project. Joe Dubler recalled that AGDC has an agreement with ExxonMobil and BP.
Klaipeda cardboard factory for ten years was pouring sewage into the Curonian lagoon
However, for 2020 the budget of Alaska LNG will be reduced to only $ 15 million. This money will go towards overcoming bureaucratic obstacles: the Federal Energy Regulatory Commission (FERC) has not yet completed an environmental review and has not issued permission to begin construction work.
It was planned that the first deliveries of LNG from Alaska will begin in 2024-2025. Now the deadlines have been moved, but the Americans are not in a hurry to “bury” Alaska LNG. It is possible that the Chinese will again show interest in the project – either on their own, or under pressure from Washington. In addition, Alaska LNG has its advantages. Proponents of a new large gas liquefaction facility in the United States put forward the following argument: the route for delivering LNG to Asia from Alaska is shorter than from the Gulf of Mexico, where the main US export capacities are concentrated. In addition, Alaska LNG operating revenues can be used to build icebreakers and deep-sea ports, which the Americans have not paid due attention to in recent years. – Economic activities in the North will help finance infrastructure in the North, – said Mid Treadwell, an expert on Arctic politics from the Woodrow Wilson Center in Washington.
Even if the Chinese are not tempted by the potential economic benefits of using Alaska LNG, the United States has many other economic and political arguments. Agreements on this issue may well become part of the final trade deal between the United States and China. Then, obviously, Gazprom will have to rethink the strategy of reorienting its export capacities to the east – its dependence on exports to Europe only promises to increase.