Chinese Investment Opportunities in Alaska

John Tichotsky, Ph.D. (Cantab.)

Commonwealth North Energy Action CoalitionJuly 26, 2018

Alaska is a resource state

• Largest oil and gas basin in North America• 4 trillion tons of high quality coal: one

ninth of world’s known coal resource.• World-scale lead/zinc deposits:

including the world’s largest zinc mine.• World-scale gold and copper mines:

numerous existing and potential.• Graphite: America’s highest grade and

largest, large flake graphite deposit.• Significant rare-earth deposits.

2

Alaska wealth is export

Presentation for Alaskan Prospectors Society

3

• Russian-American fur (1786-1867)

– Yankee whaling (1847-1880s)

• Colonial Alaska – federal territory

– US fur (1867-1911)

– Gold and copper (Kennecott 1915-1928)

– Canned salmon (1878-1940s)

– Military Alaska (1942 – 1960s)

• Alaska oil era (1950-present)

– Cook Inlet (1950-present)

– Prudhoe Bay (1969-present)

George Rogers & Arlon Tussing, University of Alaska, Institute of Social & Economic Research

Alaska’s main trade destination

https://www.trade.gov/mas/ian/statereports/states/ak.pdf

Alaska Exports to China – $1.32 billion in 2017

60.2%26.9%

4.9%3.7% 3.6% 0.4%

0.3%

Seafood$796.22 millionMineral Ores$355.8 millionFishmeal$64.6 millionEnergy$49.0 millionForest Products$48.0 millionMachinery*$5.9 million

$-

$300

$600

$900

$1,200

$1,500

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

millio

ns

China as a Resource Buyer

China is a major consumer of raw materials that can be produced in Alaska.

China share of world raw material consumption

6

U.S. Focus on Trade and Energy

China needs to buy

more from U.S.

7

China Demand for Natural Gas

Environment is a priority.

8

Alaska and China Establish Ties

9

Global Positioning

Alaska is China’s closest and most direct source of U.S. LNG.

7 to 9 days shipping.

Direct route; no third nation or canal.

10

Primary Energy Demand Growth

• China is the biggest growth market for primary energy demand.

11

China LNG Demand to Grow Rapidly

• Demand for natural gas has grown dramatically, outpacing the ability to produce domestically.

• LNG import capacity is increasing rapidly to help satisfy future demand.

12

Joint Development Agreement

Pence

13

Alaska LNG Project Overview

14

2024-2025

• An integrated infrastructure and

energy project that will monetize

Alaska’s immense, but stranded,

North Slope gas resources.

• Total project cost up to $43.4 billion.

• Commercial window of 2024-2025

to begin transportation of gas

to Asia annually.

ASIA’S CLOSEST,MOST DIRECT US LNG.

Alaska’s North Slope

15

• 35 TCF of proven and conventional gas resource.

• 200 TCF potential gas resource.

• Reliable oil & gas production for the 40 years.

• Alaska’s gas is a stranded resource for the world market.

North Slope

Alaska’s gas is proven

and conventional.

Integrated Gas Infrastructure

Fully-integrated natural gas treatment, pipeline, and liquefaction system.

• Gas Treatment Plant:

Treat and compress 3.5 Bcf/d.

Sequester all CO2.

• Pipeline:

807-mile (1,299 km), 42-inch (1.1 m) pipe.

Established corridor under State of Alaska control.

Delivers over 3.3 Bcf/d.

• LNG Production Facility:

20 MTPA; 3 trains with phased development opportunity.

Two 240,000 m3 LNG storage tanks.

Two berths, capable of 217,000 m3 vessels.

• In-service 2023 – 2025.

All components including gas supply

are within Alaska.16

Aggregated Chinese Buyers

Debt for Capacity75% of system

capacity

Onward sales in country

Regional Buyers

Equity Capacity25% of LNG

Supply

A large, state-owned, single buyer supports debt financing for associated capacity provided from in-country lender.

Remaining capacity is equity funded and sold into regional markets.

17

Project Finance Structure

EQUITY

DEBT($32 Billion non-resource)

25%

75%

Stable Pricing

Stable Pricing

Economic Benefits of Stable Pricing

• No harmful volatility.

• With the Alaska proposal, the energy bills of customers will not be subject to wild market swings or be linked to unrelated energy costs in distant markets.

• Energy price stability can improve economic growth.

18

The most stable and predictable LNG price in the industry.

Federal Support

19

Alaska Trade Delegation

20

Sinopec

agdc.usFacebook.com/AKGaslineDevelopmentCorpAlaska Gasline Development Corporation

Sinopec

• Sinopec: Very large petroleum and petrochemical

enterprise group. World’s largest fully-integrated oil and gas

company by revenue, with upstream, midstream, and downstream operations.

China’s largest producer and supplier of refined oil products.

Largest oil refinery company. 2nd largest chemical company in the world.

Sinopec’s track record of LNG developments and investments:

• Sinopec has 3 LNG receiving terminals on China’s coast (9 MTPA).• Partner with ConocoPhillips in Australia Pacific LNG (APLNG) with an

offtake commitment for 7.6 MTPA for 20 years.• 20 year, 2 MTPA contract with ExxonMobil from Papua New Guinea

(PNG LNG).

47

Bank of China

• Bank of China: World’s 4th largest bank. China’s most

internationalized and diversified bank.

Engages in commercial and investment banking and insurance and investment services.

Track Record of Successful LNG Financing:• Coral South floating LNG project in Mozambique.• Tangguh LNG in Indonesia.• Cheniere's Corpus Christi trains 1 and 2.• Australia Pacific LNG.

48

• China Investment Corporation (CIC): World’s 3rd largest sovereign wealth fund. CIC Capital is a subsidiary specializing

in making direct investments in infrastructure, mining, and energy (oil and gas).

Acquired a 10% stake in Teck Resources Limited, which operates Red Dog Mine.

Acquired a stake in 1 New York Plaza office tower for $700 million (1st direct U.S. investment).

Track Record of Successful LNG Investment:• CIC Invested $3.15 billion in GDF Suez Exploration & Production

International SA and $850 million in Atlantic LNG Company of Trinidad and Tobago in 2011.

CIC Capital

49