Joint development agreement preliminary
The joint development agreement signed Nov. 9 in Beijing envisions Alaska working with major Chinese entities to come to an agreement for Chinese participation in Alaska LNG. Signatories for the state were Gov. Bill Walker and Keith Meyer, president of the Alaska Gasline Development Corp. Chinese signatories were the president of China Petrochemical Corp., known as Sinopec, the vice chairman of CIC Capital Corp. and the chairman of Bank of China Ltd.
The agreement was released Nov. 21 at a press availability where Walker provided background on what led to the China agreement, stressing the importance of market involvement in the agreement, and Meyer gave an overview and noted that a lot of work will be required to finalize agreements for Chinese participation in an Alaska LNG project.
Introductory statements in the agreement note that Alaska is interested in commercializing the natural gas on the North Slope and the Chinese companies “have expressed their preliminary interests in the development of Alaska LNG” because of the potential for huge growth of natural gas consumption in China.
The agreement says that the parties will work together on a framework to advance AKLNG, with a focus on opportunities for collaboration in AKLNG, including system design. The agreement describes the proposed project, notes that significant work has been done and that the project is in the process of receiving environmental approval, and says the state, through AGDC, is the sole owner of the project and will be developing the system with one or more strategic partners in countries which consume LNG.
Scope of workThe JDA says the parties will work together on a scope of work defined in the agreement, including the opportunity for delivering 75 percent of the LNG produced from Alaska to China “at a cost-based and stable price utilizing the benefits of strategic financing and investment,” strategic financing opportunities and a transparent investment model.
The agreement notes that there is an opportunity for Sinopec to be involved in engineering, procurement, construction and project management and in the project’s overall development.
But AGDC would remain in control, Meyer said, and as with construction of the trans-Alaska oil pipeline, while large construction firms would have construction oversight, they would use Alaska firms and labor.
TimelineThe first timeline in the agreement is May 31, by which time the parties hope to be able to determine the Chinese disposition of 75 percent of the LNG; identify how much involvement Sinopec will have in engineering and construction; develop “the general framework and indicative pricing for potential and customary strategic financing and international project financing for Alaska LNG”; and explore the feasibility for the parties to invest in the project.
The goal for definitive agreements is the end of 2018, which is when the agreement expires unless the parties agree to extend it. The agreement also notes that any party may withdraw upon notice to the other parties.
Meyer said the goal is to have final agreements in place in 2018 so that a final investment decision can be made in 2019, with construction to start that year.