Tariff pause doesn’t change talks with China on AK LNG
Alaska Gasline Development Corp. officials believe the recent announcement of a 90-day pause on new tariffs between the U.S. and China is a positive development, but it has not changed their broader approach to reaching firm agreements with their Chinese counterparts.
AGDC spokesman Jesse Carlstrom said the leaders of the state agency have continued to monitor what they refer to as the “trade friction” between the companies, which they view as short-term while Alaska LNG is a generational project.
They have remained consistent in their view of the U.S.-China trade dispute while working to finalize deals to underpin the Alaska LNG Project with three of China’s largest companies.
President Donald Trump said in a Dec. 1 statement from the White House that he and China President Xi Jinping agreed to a 90-day pause on new or steeper tariffs on goods traded between the countries. That means a previously discussed tariff increase from 10 percent to 25 percent on roughly $200 billion of Chinese imports will not happen Jan. 1.
China has instituted a 10 percent tariff on U.S. LNG imports in response to initial tariffs imposed by the Trump administration on Chinese goods. China originally contemplated a 25 percent tariff on U.S. LNG imports.
State-owned Chinese oil and gas giant Sinopec is a potential anchor customer for the project after it signed a nonbinding joint development agreement with AGDC to purchase up to 75 percent of Alaska LNG’s expected 20 million tons per year of production capacity in November 2017.
That agreement, or JDA, also detailed the prospect of the Bank of China and China Investment Corp. correspondingly financing up to 75 percent of project development costs with a mix of debt and equity.
“All parties, AGDC and the JDA parties, have proceeded through 2018 on the work to advance the project,” Carlstrom said.
AGDC President Keith Meyer has said there are no signs from the Chinese negotiating team that the tariffs have slowed progress on the Alaska LNG deals. Meyer stresses that the project would be a major step towards balancing trade between the countries and thus should be part of resolving the economic tensions.
The Chinese consortium and AGDC signed a supplemental agreement Sept. 29 to collectively reaffirm their desire to reach a firm deal by the end of this year.
The JDA has a Dec. 31 deadline for final agreements; however, former Gov. Bill Walker said in a late November interview with the Journal that he thought the deadline might need to be adjusted in light of a new state administration taking over.
Former Gov. Sean Parnell, who initiated the current Alaska LNG Project iteration at the time led by the major North Slope producers, is advising new Gov. Mike Dunleavy on the state-led effort.
Carlstrom said AGDC and the JDA parties continue to advance negotiations on all fronts.
“We’re still on track and still aiming for that Dec. 31 target,” he said. “We’re also advancing agreements across the entire Asia-Pacific region.”
AGDC officials have touted receiving 15 letters of interest from potential LNG customers in Asia over the past two years, but most of them — including even the names of the interested parties — have been kept confidential.
Carlstrom noted that if the JDA deadline passes without firm LNG sale and financing deals in place the negotiations can continue if all the parties agree.
Elwood Brehmer can be reached at [email protected].