Alaska State Seal

A deal between Chinese companies and Alaska’s state gas corporation to build the $43 billion Alaska LNG Project appears on course despite the trade war brewing between the U.S. and China, say officials of Alaska Gasline Development Corp., the state gas corporation.

“AGDC is actively engaging with the Alaska LNG Joint Development Agreement parties. However, we do not confirm the timing of potential customers’ meetings,” AGDC spokesman Jesse Carlstrom said.

The partners include Sinopec, which would purchase 15 million tons of LNG yearly; Bank of China, which would provide about $30 billion in financing, and China Investment Corp., which would provide part or all of $10 billion in equity financing.

The target is still to have key commercial agreements signed by the end of 2018. Gov. Bill Walker’s goal when the deal was announced in late 2016 was to have terms finalized by the end of December of this year.

Under the current plan, AGDC would own the project, purchase gas from North Slope producers and sell it to customers, mostly in Asia.

Meanwhile, AGDC is largely shrugging off worries over the trade dispute, figuring it will be resolved before it will impede the project’s long-term schedule, which is to be in operation in 2024.

In other developments, Keith Meyer, AGDC’s CEO, told the state corporation board Thursday that Sinopec, which would be the hoped-for customer for the LNG, would like to have engineering and technical service subsidiaries involved in the project. However, the company does not intend to play a major role in construction management.

“Sinopec feels it does not have the required experience in Arctic construction to manage construction, although they would hope to provide engineering and other services,” Meyer said.

Given that, AGDC is looking for a major construction and engineering company to manage construction is now interviewing two contenders, Meyer told AGDC’s board in a meeting last week.

Under the proposed deal Sinopec would purchase 15 million tons a year, or 75 percent of Alaska LNG’s planned 20 million tons/year of production. AGDC is holding 25 percent of output, or 5 million tons/year, for other potential purchasers, primarily in Asia.

Discussions also are underway with Tokyo Gas, Korea Gas and PetroVietnam and others for the remaining 5 million tons per year, or 25 percent of Alaska LNG’s planned capacity, Meyer told the board.

On regulatory approvals, AGDC’s vice president for engineering, Frank Richards, told the board that the corporation is closely monitoring the workload at the U.S. Federal Energy Regulatory Commission, which is now preparing an Environmental Inpact Statement for Alaska LNG, to assess the potential for bottlenecks and delays.

Alaska LNG is one of eight export LNG projects before the FERC and there is concern that approvals on some projects may be delayed because of resource constrains within agency.

FERC’s schedule is to have the Draft Environmental Impact Statement complete by next spring. “We believe we have a greater than 50 percent chance of meeting that,” Richards said, but there is still concern.

The estimate is based on work by a consultant hired by AGDC to analyze other LNG applications and FERC’s internal workload

Richards said the commission also has started asking project applicants to hire technical consultants to work with FERC staff directly to cover gaps in the agency’s own staff.

One gap identified so far is in FERC’s review of fire suppression in LNG plants, Richards said. To cover that on Alaska’s application AGDC is close to issuing a Request for Proposals for a firm with relevant expertise to work with FERC staff, he said.

FERC’s timeline on the EIS and the commission’s overall authorization in 2019 needs to stay on track for the Alaska LNG partners to meet a planned 2020 Final Investment Decision and a goal to be in operation in 2024.

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