U.S. Energy To See Huge Investments From China

China wants to secure its supply of LNG.

By Tsvetana Paraskova, Oilprice.com:

During President Trump’s visit to China, the U.S. signed US$250 billion worth of potential trade and investment deals that would boost American exports to China and Chinese investment in the United States.

The two single largest potential deals were signed in the energy sector at the official U.S.-China Business Exchange, which took place on November 8th and 9th during President Trump’s visit.

The agreements are just memorandums of understanding (MoU), not final contracts, but they set the stage for a stronger energy relationship between the two powerhouses of the global energy production and consumption.

There is some concern that Chinese investment in U.S. energy could undermine free market principles. On the Chinese side, it’s unclear if Beijing is convinced that the U.S. will not use energy to retaliate against China by cutting supplies if disputes or disagreements escalate, Forbes contributor Sara Hsu writes.

The White House described the potential deals as such “that will create jobs for American workers, increase United States exports to China, and stimulate investment in American communities.”

West Virginia and Alaska were the two biggest beneficiaries of potential deals for Chinese investment, both which are in the energy sector.

West Virginia announced the plan of the world’s biggest energy corporation—China Energy Investment Corporation—to invest US$83.7 billion in shale gas development and chemical manufacturing projects in West Virginia. This was the largest pledged investment out of the US$250 billion potential deals that the U.S. signed in Beijing.

China Energy—created by the recent merger between state-owned coal miner Shenhua Group and energy producer Guodian Group—plans the investment to span over the course of 20 years. The amount is higher than West Virginia’s US$72.9 billion gross domestic product (GDP) in 2016.

“Expanding Appalachia’s energy infrastructure, including developing a regional storage hub and market for natural gas liquids, will have a transformative effect on our economy, our security, and our future. From driving growth and creating jobs to maximizing America’s energy potential, the benefits for West Virginia and the country from this new investment will be significant and long-lasting,” Senator Shelley Moore Capito said in West Virginia Department of Commerce’s statement.

The second-biggest Chinese investment is planned for the state of Alaska, for advancing Alaska’s strategic gas infrastructure project – Alaska LNG.

The State of Alaska, Alaska Gasline Development Corporation (AGDC), China Petrochemical Corp (Sinopec), China Investment Corporation (CIC), and Bank of China (BOC) signed a joint development agreement to advance Alaska LNG. The deal, expected to involve a total investment of up to US$43 billion, will create up to 12,000 American jobs during construction, reduce the trade deficit between the United States and Asia by US$10 billion annually, and provide China with clean, reliable, and affordable energy, the U.S. Commerce Department said.

“Sinopec is interested in the possibility of LNG purchase on a stable basis from Alaska LNG,” Sinopec said in AGDC’s statement.

“This is an agreement that will provide Alaska with an economic boom comparable to the development of the Trans-Alaska Pipeline System in the 1970s,” Alaska Governor Bill Walker said.

In two other potential energy deals signed during President Trump’s visit, Cheniere Energy and China National Petroleum Corporation signed a MoU on long-term LNG sale and purchase cooperation, while Delfin Midstream, developing the first floating facility to export U.S. natural gas, signed a MoU for a 15-year sales deal with city gas distributor China Gas Holdings to supply 3 million tons of LNG annually from 2021. The US$8-billion LNG project will be located 50 miles off the coast of Louisiana.

The planned LNG deals fit in both the U.S. and Chinese natural gas production and consumption patterns and priorities.

The U.S. is expected to become a net exporter of natural gas this year and to continue to be a net exporter past 2018 due to rising exports to Mexico, declining pipeline imports from Canada, and growing LNG exports, the EIA says.

By 2022, the U.S. is expected to account for 40 percent of the world’s extra gas production, and will be on course to challenge Australia and Qatar for global leadership among LNG exporters, the International Energy Agency (IEA) has estimated.

China, on the other hand, is expected to become the leading determinant in global natural gas demand in the coming decades. Economic and industrial production growth, coupled with efforts to reduce stifling pollution levels, will lead to surging natural gas demand and an increase of natural gas as part of China’s energy mix at the expense of coal.

Although the U.S.-China agreements have yet to translate into definitive contracts, energy ties have been strengthened despite political differences. By Tsvetana Paraskova, Oilprice.com

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  26 comments for “U.S. Energy To See Huge Investments From China

  1. Paulo
    Nov 27, 2017 at 12:38 pm

    regarding:
    “Although the U.S.-China agreements have yet to translate into definitive contracts, energy ties have been strengthened despite political differences.”

    yeaaah rightttt. BC LNG has been for sale for the last decade with the right wingers ready to give away the store, Plus! ready to install a new Hydro source for compression needs. China has not made one move towards it. I doubt any US agreement has any hope of going forward.

    And, I am trying to figure this one out. Uranium 1 deal bad for US, even though no Uranium actually goes to Russia. But, it is okay to sell energy to China to fuel competing industry. Seems to be a disconnect, somewhere.

    I call BS, despite Oilprice being a very reputable site which I visit daily.

    • Nov 27, 2017 at 4:17 pm

      US exports of LNG, oil, and petroleum products to competing countries are surging. This includes exports of LNG to China, which commenced in 2016, and which are soaring in 2017. This isn’t anything new if you pay attention to the US energy market. The US has been building and continues to build LNG export terminals along with pipelines to supply these terminals with natural gas. As new trains come on line, LNG exports continue to surge. Look at the data!

      Don’t draw too many conclusions from the LNG situation in Canada to the LNG situation in the US.

    • Raymond Rogers
      Nov 27, 2017 at 5:45 pm

      “With the right wingers trying to give away the store”

      Wolf, I thought you were going to stamp out these foaming-at-the-mouth political temper tantrums?

      • Nov 27, 2017 at 6:45 pm

        Yeah, I missed that one. Thanks. I was too busy countering his other statements.

  2. draculus
    Nov 27, 2017 at 12:43 pm

    mou’s mean nothing. given the geopolitical rivalry between the 2 & the transportation costs, this article is wishful thinking!!!

    • Nov 27, 2017 at 4:07 pm

      Economically and financially, China and the US have been joined at the hip for years, despite geopolitical squabbles. Neither economy can now do without the other.

      • draculus
        Nov 28, 2017 at 1:14 pm

        read about the gas pipelines being built or already built connecting china to gas fields in siberia, turkmenistan & persia. also their extraction costs, transport costs and lead-times are much lower.

        yes china & the us are joined at the hip – for now….that is in the process of changing. other than the internal us market, the natural market for us fracked gas is mexico (w/ or w/o nafta)

        the us w/b a supplier but a tertiary one (outlier). the chinese were playing their visitor…….just like the supposed foxconn deal in wisconsin.

  3. NotMyPresident
    Nov 27, 2017 at 1:13 pm

    The two biggest users of carbon in the world planning (nay shall we say conspiring) to pull more carbon from the ground to put into the atmosphere? Will the bleeding never stop in the killing of our planet and the destruction of our children’s futures.

    • walter map
      Nov 27, 2017 at 1:29 pm

      Yes, it will stop. That’s what ‘unsustainable’ means.

    • Nick Kelly
      Nov 27, 2017 at 2:19 pm

      Better to burn nat gas than brown coal.

      • walter map
        Nov 27, 2017 at 2:54 pm

        So you get a choice as to how to you’re going to be cooked. Now that’s real freedom.

        • Raymond Rogers
          Nov 27, 2017 at 5:49 pm

          You say this while typing on a device that requires power. Do you live a modern life or do you sustain yourself in the woods? Your energy needs will never be met with magic.

          Note that I used the word “energy” and not simply “electricity”.

        • walter map
          Nov 27, 2017 at 6:32 pm

          “Do you live a modern life or do you sustain yourself in the woods?”

          Best of both worlds here.

          “Your energy needs will never be met with magic.”

          Solar is magic. So far, so good.

  4. unit472
    Nov 27, 2017 at 1:58 pm

    The Alaska deal makes a lot sense as Alaskan gas cannot compete in the US domestic market so it is, in effect, stranded in Alaska. Since this gas does not need to be ‘fracked’ that issue is moot.

  5. Nicko2
    Nov 27, 2017 at 2:50 pm

    MoU’s are meaningless, wait until the infrastructure is actually built and put into service. These are non-events meant to burnish Trump’s image as a ‘deal-maker’.

    • Nov 27, 2017 at 4:26 pm

      LNG exports are a very serious business in the US and predate Trump. Tens of billions of dollars are already being invested in new and under-construction LNG export terminals (most of them approved by the Obama administration). And China, which depends in part on LNG imports to diversify its energy portfolio away from coal, will be an ever larger LNG importer. Match supply and demand. Voila.

      • thelocalpragmatist
        Nov 28, 2017 at 7:07 pm

        Mr. Richter,
        It has been long rumored here in Coos Bay Oregon that there will be built a huge natural gas export infrastructure, deepening the bay, etc. to export natural gas and other energy products. At this time there has been no movement towards building a terminal, pumping facilities, employee housing, etc. Perhaps we did not have enough “Juice” to get it done? Any thoughts?

  6. walter map
    Nov 27, 2017 at 2:52 pm

    All expected future profits from these deals will be divvied up between the signatories before any product moves. Then these deals will be promoted to investors big and small as ‘opportunities’ so they can be skinned to provide performance bonuses to insiders.

    You’d be amazed at how common this is. Or, maybe you wouldn’t.

    • Nicko2
      Nov 27, 2017 at 5:57 pm

      Sounds just like off-plan Real estate schemes.

  7. Nov 27, 2017 at 4:46 pm

    I still consider LNG the center of a new US energy policy, to break Russia’s hold on Europe, to provide Japan some relief – from nuclear – (they pay 5X the going rate for NG) and to separate our own energy needs from the ME. If Trump wants to deal the largest share to China, (a serial air pollution violator) low cost NG is based primarily on low interest rates, and will US monetary policy “walk the walk”. At present US retail consumers are led AWAY from NG, although government and quasi government are using it in transportation, consumers benefit if you ride the bus. I don’t like the idea that we will be subsidizing cheap energy for foreign users to the exclusion of US retail customers.

    • walter map
      Nov 27, 2017 at 6:41 pm

      “I don’t like the idea that we will be subsidizing cheap energy for foreign users to the exclusion of US retail customers.”

      You Yanks have a government which pays corporations to go overseas, so why not grease deals with higher domestic fuel costs?

      No, really. Google up “offshoring subsidies” or something similar. US workers pay taxes to kill their own jobs.

      • mean chicken
        Nov 27, 2017 at 8:38 pm

        I call this offshoring, taxpayer subsidized globalization. Some mistakenly call it free trade.

        Recently, those who lost those employment opportunities have been called irredeemables.

  8. Mike Earussi
    Nov 27, 2017 at 7:34 pm

    Any deal that cuts down on the amount of Chinese air pollution that those of us on the West Coast are forced to breathe I’m all for.

    https://www.npr.org/sections/thetwo-way/2017/03/03/518323094/rise-in-smog-in-western-u-s-is-blamed-on-asias-air-pollution

    • roddy6667
      Nov 27, 2017 at 9:12 pm

      You must be a young person. I am almost 70, and when I was college age California didn’t have to import Chinese air pollution. They made their own, thank you. The air and water quality in America was appalling. Every country that went through a manufacturing stage of development had major pollution issues. Japan was one of the most polluted places on the planet, but it became the model for cleaning up the air, water, and soil later.
      America has lost most of the industries that use coal, so it has become easier to be green.
      Two years ago I was in Bethlehem, PA, once the home of Bethlehem Steel, the largest producer of steel in the world. Like any other steel or factory city, it had awful air and everything was covered in dust and grime. This lasted until the early Sixties.
      Now it is fashionable to pretend that a country can simply skip that stage of development and all those products and commodities will magically appear.
      Most people are too young to remember how it was.

      • 2GeekRnot2Geek
        Nov 28, 2017 at 6:31 am

        Roddy,

        I’m not as old as you, but I grew up in the woods in the 1960‘s, so I remember.

        Estimates for fossil fuel exploration and production subsidies in the US alone range from $10 billion to $52 billion annually. So not only does the taxpayer subsidize the industry and it’s profits, we get to pay the price for all of the ancillary environmental and healthcare problems too.

        Until the world walks away from the fossil fuel and all it’s subsidies model and starts looking at alternative renewable energy sources as a way forward, people around the world will pay for it in every way imaginable.

        I remember my parents amazement when Lake Erie caught on fire, the loss of large predator birds for decades, and my own disbelief decades later when I learned about the Pacific gyre.

        Those memories will never leave me. It took 25+ years and a lot of saving, but I now have a home with geothermal heating and 10 KW of solar on the roof, and planning to add more solar in the next 5 years to reach net zero.

        As a species, if we don’t get off the fossil fuel merry go round, things are going to become really interesting by 2030.

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