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MONDAY, NOVEMBER 13, 2017

China Energy's interest in W.Va. natural gas may not necessarily turn into big investment

China Energy, the world's largest power company by asset value, signed a non-binding letter of intent last week to invest $83.7 billion over 20 years to develop West Virginia's natural gas industry, but some remain skeptical that the deal may ever materialize.

China Energy, the world's largest power company by asset value, signed a non-binding letter of intent last week to invest $83.7 billion over 20 years to develop West Virginia's natural gas industry, but some remain skeptical that the deal may ever materialize.China Energy, the world's largest power company by asset value, signed a non-binding letter of intent last week to invest $83.7 billion over 20 years to develop West Virginia's natural gas industry, but some remain skeptical that the deal may ever materialize.

For one thing, "As Bloomberg Intelligence energy analyst Michael Kay points out, not even U.S. energy pipeline giant Kinder Morgan Inc. budgets that much for growth projects. There just isn’t enough infrastructure with high enough returns to make it worthwhile," Emma Ockerman and Lynn Doan report for Bloomberg.

Politicians and companies have been trying to develop an energy hub in Appalachia since shale gas began booming almost a decade ago, but it's still easier and cheaper to drill for gas and use the from the long-existing transport hub on Louisiana's Gulf Coast. Energy companies in the Eastern U.S. also face substantial regulatory hurdles in getting projects approved. "Some project developers have spent over a year waiting for federal approval as landowners and environmentalists there lodge complaints and stage protests. Even as politicians push for more investments, pipeline giants from Energy Transfer Partners LP to Williams Partners LP are being forced to delay projects because of regulatory setbacks and legal challenges," Ockerman and Doan report.

Another pitfall of the China Energy deal is that most of the major infrastructure investments needed for the Appalachian energy market may have already been made. "Enough pipelines are coming online to increase the region’s take-away capacity by about a third. And so much gas-fired power generation has been built in the area that Moody’s Investors Service has warned of 'a gas-driven apocalypse' in the power market," Bloomberg reports. "Later this year, Dominion Energy Inc. will bring online a liquefied natural gas export terminal in Maryland, and an ethane export terminal at Marcus Hook, Pa., is already sending cargoes overseas."

China Energy will need to supply more details before the deal's feasibility can be assessed -- details that the Charleston Gazette-Mail's Ken Ward Jr. says are thin on the ground: "What kinds of natural gas processing plants, pipelines or cracker plants will China Energy Investment Corp. Ltd. build? Where? How many jobs will be provided and how many of them will go to West Virginians? Is the state’s environmental regulatory system up to the task of protecting residents? What about the long-term climate effects of the drive to burn more fossil fuels? Will this kind of investment in natural gas spell an even faster decline for West Virginia’s already struggling coal industry?"

Whether the memorandum of understanding comes to fruition remains to be seen. "At the end of the day what really counts is contracts," Jason Feer, head of business intelligence at Poten & Partners Inc. in Houston, told Bloomberg's Jim Polson. "An MoU is usually an agreement to continue talking."

Written by Heather Chapman

Posted at 11/13/2017 

 

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