Following the announcement of Alaska and China signing a joint development agreement to advance Alaska LNG, Wood Mackenzie and Verisk Maplecroft analysts have commented:
Kerry-Anne Shanks, Head of Asia gas and LNG research, Wood Mackenzie
The Alaska LNG project is at an early stage of development. Wood Mackenzie classifies it as speculative, which means the commercial structure and marketing plan are not yet clear. It is likely to take a few years before the project is ready for FID (Final Investment decision). LNG projects generally take at least four years to construct from project sanction.
Alaska has exported LNG in the past via the Kenai LNG plant.
The main issue for the Alaska LNG project is its high cost. It is a large project at 20 million t of capacity, with an 800 mile pipeline. Sinopec may be able to secure cheaper LNG supply elsewhere.
Alaska LNG has the advantage of being closer to China than US LNG projects located on the Gulf Coast.
Hugo Brennan, Asia analyst, Verisk Maplecroft
This kind of commercial agreement allows Trump to portray himself as a master dealmaker, while distracting from a lack of progress on structural reforms to the bilateral trade relationship.
The deal is politically expedient, yet its non-binding nature gives Sinopec the flexibility to quietly back away from the deal down the line. Beijing is mindful of the need to maintain varied commodity import routes.
LNG imports from Alaska align with strategic objectives cloaked within China’s Belt and Road Initiative. Alaskan LNG would help reduce China’s reliance on energy trade that must transit maritime chokepoints vulnerable to potential disruption.
Its strategic advantage over LNG supply from the East Coast is that it would not have to transit the Panama Canal.
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