The cornerstone of US President Donald Trump’s first East Asian tour has been his visit to Beijing and subsequent meetings with Chinese president Xi Jinping this week. The summit took place at the conclusion of the 19th Party Congress, which included a pledge by President Xi to expand and deepen China’s foreign policy interests on both a regional and international scale. Despite numerous criticisms of Chinese foreign and trade policies made by Mr Trump when he was a candidate for president last year, his visit saw the completion of several Sino-American business deals, worth an estimated US$250 billion.
One of the most prominent of these deals was a joint development agreement by one of China’s largest energy concerns, Sinopec, along with the Bank of China (BoC) and China Investment Corp CIC, to develop a liquefied natural gas (LNG) project in Alaska in a deal potentially worth US$43 billion. This agreement, if ratified, promises to help alleviate Alaska’s struggling fossil fuel sector, heavily impacted by lowered global prices for oil and gas and struggling with recession, a debt estimated at US$3 billion, and being left behind by the shale oil boom in the ‘Lower 48’. The new LNG project may also further integrate China into the Arctic economy as Beijing begins to expand its commercial interests in the far north.
Specifics of the deal have yet to be released, but the American partners in this enterprise would be the State of Alaska and the Alaska Gasline Development Corp. (AGDC), and the project would involve the construction of an LNG pipeline, to provide natural gas for the Chinese market, at prices yet to be determined. It was hoped that the specifics of the partnership could be finalised by the end of 2018 with ground being broken in 2019. Another major US-China energy deal signed during Mr Trump’s China tour was an agreement with China Energy Investment Corp. [In Chinese], worth over US$83 billion, to invest in shale gas and chemicals in West Virginia.
If construction moves forward on schedule, the agreement will be beneficial for Alaska, which has been seeking to expand overseas markets for the state’s fossil fuels, with Governor Bill Walker looking at China as well as other major East Asian economies as potential candidates. Mr Walker accompanied President Trump to China in the hopes of securing an LNG deal in light of growing Chinese demand, and has expressed hope that a pipeline could transport natural gas on the Alaskan North Slope to a port in Nikiski on the Kenai Peninsula, in order to supply Pacific Rim markets. President Trump has also expressed hope that deals of this type would address what he deemed an unacceptably large US trade deficit, estimated at US347 billion in 2016, with Beijing.
As China’s energy demands soar, its economy, while slowing somewhat, still requires greater amounts of imported fossil fuels, especially as the country seeks to move away from inefficient and polluting coal. Coal consumption in China was reported to have peaked in 2013 as government pressure to seek alternative, including renewable, sources began to intensify. Yet it is still estimated that over sixty percent of energy consumed in China is from coal, and Beijing is seeking to cut that figure to 58% by 2020. Liquefied natural gas has been seen as an important component of the Xi government’s energy reform plans.
Russia has been a prominent energy partner for China in recent years. Earlier this month, it was announced that the Russian firm Novatek struck a deal with the China National Petroleum Corporation (CNPC) and the China Development Bank to cooperate on the development of Novatek’s natural gas and LNG projects at Yamal in Siberia, further positioning the Russian Arctic to become a leader in fossil fuel development in the Far North. China has also been purchasing LNG from Australia and Qatar, and is, along with India, Japan and South Korea, one of the world’s leading LNG consumers.
In May of this year, the US Department of Commerce (DoC) gave what was viewed as an official green light for increased LNG sales to Chinese markets. Proof that Alaska had begun to appear on Beijing’s radar as a potential economic, as well as energy partner appeared in April of this year when President Xi, after meeting with President Trump in Florida, made an unexpected stop in Anchorage where the Chinese leader met with Governor Walker before traveling returning to Beijing. Among the discussion topics was cooperation in natural gas development, along with fishing, tourism, air cargo and mineral resources.
Over the past decade, China has begun to view the Arctic as a potential source of fossil fuels due to the changed conditions in the region created by ice erosion. The China National Offshore Oil Corp (CNOOC) is currently partnering with Iceland’s Eykon Energy and Petoro of Norway in surveying for fossil fuels near Jan Mayen Island in the North Atlantic, and in October of this year China purchased LNG from Norway in order to avoid winter fuel shortfalls. With diplomatic relations fully restored between Beijing and Oslo since last December and stalled free trade agreement talks slated for reopening, there exists the possibility of further Sino-Norwegian energy cooperation. As for the Yamal project in Siberia, which is twenty-percent owned by CNPC and is estimated to be worth US$27 billion, its construction has benefitted greatly from Chinese support, including large-scale loans.
With China’s ambitious Belt and Road project now officially incorporating what has been termed the ‘blue economic passage’ (lanse jingji tongdao 蓝色经济通道) being created in the Arctic Ocean due to the receding polar ice cap, Beijing has become more open about the possibilities for joint cooperation in Arctic resource development, including in the oil and gas sectors and energy demands in the country grow.