Thursday, January 5, 2012

State officials visit China to spark interest in LNG export

Tim Bradner
Alaska Journal of Commerce

Gov. Sean Parnell has tilted the state’s support toward a large liquefied natural gas, or LNG, export project for North Slope gas, and senior state officials are talking up the idea in Asia.

“We realize deals will be cut by the parties involved, but we want to make sure people in Asia know about Alaska and our potential,” said Dan Sullivan, state commissioner of Natural Resources.

Sullivan and Deputy State Commerce Commissioner Curtis Thayer were in China in mid-November to attend a high level Asia regional energy conference and to meet with senior government and private-sector officials who influence China’s energy policies.

Sullivan had been invited to address the Asia Pipeline Summit, a major conference, held in Beijing Nov. 16. While there, he and Thayer organized a number of appointments to talk about Alaska.

“This was part of a broader effort we are making to promote a better understanding of what is going on in Alaska, and of our resource potential, in the aftermath of the governor’s speech,” announcing the shift to supporting an LNG project.

“The governor was in Europe to meet with BP and Shell, along with attending a seafood marketing event, and Commissioners (Susan) Bell and (Marc) Luiken were also in China at about the same time we were to make calls on seafood buyers and air carriers,” Sullivan said.

The Asia pipeline conference itself was attended by 150 to 200 people, Sullivan estimated, and included a cross-section of government and private officials from several nations interested in energy development and transportation in Asia.

Sullivan’s presentation to the conference was a version of the talk about Alaska’s oil and gas potential he has given many times at conferences and private meetings, highlighting the oil and gas resource base.

Several points were tailored to the audience in Beijing, however. One is that Alaska is currently the only U.S. state exporting gas, in the form of LNG, to Asia. The state has a 40-year record as a reliable supplier of LNG to utilities in Japan. In 2011 the first LNG shipments were made from Alaska to China.

“A lot of people in Asia don’t know about Alaska’s track record as a reliable supplier,” Sullivan said.

Secondly, Alaska’s North Slope gas is “wet” with natural gas liquids mixed with the methane, the main component of natural gas used for heating. This is important because natural gas liquids like ethane are important in the manufacture of other products.

“Wet gas is more valuable than dry gas as a petrochemical feedstock – it contains more of the larger (hydrocarbon) molecules that can be refined and reconfigured into more varied compounds,” Sullivan said in his presentation at the conference.

Among all of the advantages of doing energy business with Alaska, one that seemed to impress people the most was geographic diversification of energy supply sources.

“If China is going to buy more LNG, these people don’t want to be bound to two or three supply sources,” Sullivan said. “Most of the presentation was what I make to others, but people in China were still impressed at how large just the conventional resources are, to say nothing of the unconventional. When I explained that we produce and re-inject 8 (billion) to 9 billion cubic feet of gas daily on the North Slope, a lot of people express disbelief. That’s about the average gas consumption of Canada.”

In addition to the conference, Sullivan met with officials at the Ministry of Finance; China Council for the Promotion of International Trade; The Clean Air Task Force; Goldman Sachs; National Energy Administration; and the CITIC Group. He also met with U.S. Ambassador Gary Locke and other officials at the U.S. Embassy.

Thayer attended many of the meetings.

Potato trade

On a different topic – Alaska seed potatoes – Sullivan met with officials from Heilongjiang Province, including one who had flown to Beijing just to meet with the commissioner.

“They are interested in buying seed potatoes from Alaska and collaborating in research,” Sullivan said.

On returning to Alaska, the commissioner passed the information on to officials in the state Division of Agriculture, which is part of the Department of Natural Resources headed by Sullivan.

Sullivan has previous experience in China from his days working in the U.S. State Department as an assistant secretary of state responsible for energy, among other areas, and has attended dozens meetings there. The experience proved useful on the November trip.

“I’m not a China expert but you get a sense of when someone is just being polite in a meeting. In these meetings there were a lot of questions and some meetings that were scheduled for 45 minutes turned into an hour and a half,” Sullivan said.

Everything learned there has been passed on to the Alaska producing companies, which would actually negotiate any contracts, the commissioner said.

Thayer said he was impressed with how much some officials knew about Alaska even before the meetings.

“They knew about our decline in production and pipeline throughput, and wanted to know what we are doing about it,” Thayer said.

Also, although political concerns over energy ties with the U.S. didn’t surface in talks directly, the subject came up in oblique ways.

“There was concern as to how the U.S. government would view exports of gas to China,” he said.

The U.S. government’s rejection of a bid by a major Chinese company to buy Union Oil Co. of California was mentioned.

Alaska’s rejection four years ago of a bid by major Chinese energy company Sinopec in the Alaska Gasline Inducement Act solicitations did not come up in talks, Sullivan said. Although there were political concerns raised at the time by Alaska’s congressional delegation the company’s AGIA application had other problems with its qualification, the commissioner said. Sinopec was represented by an Alaska company owned by a Chinese-American.

Although China has not yet made a direct investment in Alaska natural resources, Chinese companies are indirectly involved through other parties, Sullivan said. For example, a Chinese company owns a substantial share of Teck, which operates the Red Dog and Pogo mines in Alaska. Also, another Chinese company has an agreement to purchase gold produced at the Kensington Mine near Juneau.

Read more: http://www.alaskajournal.com/Alaska-Journal-of-Commerce/AJOC-January-8-2012/State-officials-visit-China-to-spark-interest-in-LNG-export/#ixzz1icCMEc8a