Last week Alaska Lieutenant Governor Mead Treadwell announced during a speech at The University of Alaska Anchorage’s MatSu College he had met with officials in China regarding trade and suggested the possibility of exporting North Slope liquified natural gas to China. This effort is in response to the economic, political, and regulatory hurdles associated with the development of a natural gas pipeline to the lower 48 the state has been struggling with for years. The time is right as China seems anxious to equalize trade and has a significant energy need. There may even be opportunities for Chinese funding for infrastructure development to get the project off the ground.
The state’s motivations are twofold. First, new natural gas discoveries in the Lower 48 have reduced the price of gas making it no longer economically viable in the short-run to build a gas pipeline. Of course we know that politicians don’t generally think in terms of the long-run, but I digress. The second reason is that the Alaska pipeline is drying up. The inability to drill new wells is only part of the problem. The existing reserves have reached a point where the oil is mixed with a significant amount of natural gas. Since there is no way to ship the gas anywhere, they are forced to inject it back into the ground. This process slows down the ability to pull oil out of the ground. If they sell the gas, they get to pump more oil.
From AFP on the balance of trade:
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