WV announces $83.7B shale gas, chemical deal with China Energy (Charleston Gazette-Mail)

November 9, 2017

West Virginia has a $83.7 billion investment agreement in place with a China-owned energy company for shale gas and chemical manufacturing projects in the state over the course of 20 years, the state Department of Commerce announced Thursday morning.

Gov. Jim Justice called the deal, a memorandum of understanding, “the largest investment in our state’s history” in a news release, and the deal is the largest of several agreements China made with the United States totaling $250 billion, the release said.

The projects will focus on power generation, chemical manufacturing and underground storage of natural gas liquids and derivatives, the release said.

A memorandum of understanding is a nonbinding business agreement and typically the start of developing a formal agreement. It is “the first step in a series of commitments” between the state and the company, the release said. It was signed by West Virginia Commerce Secretary Woody Thrasher and China Energy President Ling Wen on Thursday, the release said.

Specific details of the MOU are limited. Commerce spokeswoman Samantha Smith said a summary of the MOU will be released but when that will be has yet to be determined.

Thrasher said site locations for initial projects have not been finalized, but Brooke and Harrison counties have been tentatively identified as the locations for two natural gas power plants the agreement will factor into, according to a news release from the West Virginia Chamber of Commerce.

Brian Anderson, director of the West Virginia University Energy Institute, said specific projects that come out of the agreement likely will be the subject of due diligence from China Energy. Projects resulting from the deal could locate anywhere in the state, he said, but most likely will land in or between Hancock County and Kanawha County.

Whether the natural gas plants that the Energy Solutions Consortium is developing in those two counties is connected to the MOU was not clear Thursday, but Anderson said the agreement could help advance the development of plants like them.

Smith said development incentives, like tax breaks, have not yet been determined.

The release said China Energy selected West Virginia partly because it features one of the largest known shale gas reserves.

“The massive size of this energy undertaking and level of collaboration between our two countries is unprecedented,” Thrasher said in the release.

China Energy formed through a merger between the Chinese government-owned coal mining company Shenhua Group and energy company Guodian Group, the release said, adding that China Energy is now the world’s largest power company, with more than 200,000 employees.

West Virginia University has been jointly researching coal liquefaction with the Shenhua Group.

In its own news release, WVU said it will work closely with the state government to coordinate the investment.

WVU’s release added that investments also will go toward infrastructure, including electricity from natural gas plants, chemical and polymer manufacturing and high-end chemicals. Much of the deal’s investment will focus on the development of an “Appalachian Storage and Trading Hub,” it said.

State officials, including Thrasher, have long touted the potential of a natural gas storage hub in the state. In a September speech at The Greenbrier resort, in White Sulphur Springs, Thrasher cited a study by the WVU Energy Institute that found three of five plausible hub locations identified are in West Virginia. Several energy companies contributed funding for the study.

Anderson said the investment will help the West Virginia, Pennsylvania and Ohio region become “the second major petrochemical hub in the United States,” the first being in the Gulf Coast region.

Anderson said the West Virginia infrastructure built during the chemical manufacturing heyday in the 1970s made the investment more appealing for China Energy.

Before Thursday’s announcement, Sens. Joe Manchin, D-W.Va., and Shelley Moore Capito, R-W.Va, had been encouraging an ethane storage hub development in West Virginia. They co-sponsored a bill in June, the Capitalizing American Storage Potential Act, that would make the hub eligible for certain loan guarantee programs, in addition to a bill in May that would call for an assessment of the feasibility of a storage hub in central Appalachia.

The gas storage project is estimated to cost about $10 billion. Proponents say easy access to natural gas products via the hub and pipeline infrastructure would attract investment from the chemical and plastics industry.

John Deskins, WVU’s chief economist, said natural gas storage and downstream activities, such as refining and distribution, are rife with economic potential, adding that one of the biggest questions the state faces in the next 20 years is how much it will develop these industries. But the development of a storage hub takes time, he said, especially in regard to site location and regulatory approvals.

“Keep in mind that this is a long ways away,” Deskins said. “This [MOU] is spread over a 20-year period. Who knows what our state and economy will look like then? But the fact is: This is coming.”

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