China's demand for cleaner LNG fuels pipeline partnership, but is it a pipe dream?

 Pollution fills the sky over Beijing in May 2018 (KTUU)
Pollution fills the sky over Beijing in May 2018 (KTUU) (KTUU)
Published: Jun. 4, 2018 at 1:21 PM AKDT
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A liquified natural gas pipeline through Alaska has been talked about for decades, and while some have called the project a pipe dream, the proposal continues to gain traction as the result of a relatively new partnership forged between Alaska and China.

If you've spent any time in one of China's mega cities, like Beijing or Shanghai, it's easy to see understand China's interest in clean-burning fuel. At times, the pollution is so bad, it's not only tough to see the tops of buildings, but breathing can be a struggle.

"About half the world's coal is consumed here," said Alaska Gasline Development Corp. President Keith Meyer. "Seventy percent of their fuel for power generation is coals. They're very serious about shifting that to natural gas."

On November 9, 2017, the Alaska Gasline Development Corp., Bank of China, Sinopec and CIC Capital signed a non-binding Joint Development Agreement in Beijing. Bank of China would be the lender, Sinopec the purchaser and CIC Capital a potential equity investor.

As it stands now, 75 percent of the financing for the development of the roughly $43 billion gas line project would come from China, and once the project is completed, 75 percent of the pipeline's capacity would be sold to China.

Recently, Alaska Gov. Bill Walker and a trade delegation spent about 10 days in China. Although meetings were held with each of Alaska's Chinese partners, no announcements, big or small, came as a result. Although, early on in the Trade Mission, at the China-U.S. Governors Forum in Chengdu, Gov. Walker acknowledged that LNG was not a theme of the mission, saying the project is moving along all on its own.

Since the Joint Development Agreement was signed about seven months ago, Meyer says AGDC has had people on the ground in China, or their Chinese partners in Alaska, almost continuously.

"We're in the deep throes of discussions and negotiations with our Chinese partners," said Meyer. "It's a lot of paperwork this year. Not just with these agreements, but with debt agreements, regulatory process and construction agreements."

Meyer predicts the next big announcement will come at the end of the year, when a binding definitive agreement is expected to be reached. He expects construction of the pipe to begin in 2020.

"I put a very high probability on this project, in the 90s" Meyer said. "China has been a significant change in the industry."

In 2017, the Alaska Office of International Trade says Alaska exported more than $1.3 billion in goods and services to China. If the LNG pipeline becomes a reality, Gov. Walker says that number could increase by a factor of 8 or 10.

Watch Channel 2's full coverage of China Trade Mission: Alaska's New Frontier? on Channel 2 News until June 6. Due to Game 4 of the Stanley Cup Finals, Monday's segment will air in the Late Edition at 10:00 p.m.