Trump’s China Trip To Reap Billions In Energy Deals

U.S. President Donald Trump will visit China November 8-10 for a series of bilateral and commercial events, including a meeting with Chinese President Xi Jinping.

On that trip, President Trump’s first visit to China—the country that he has repeatedly criticized for trade practices and the way it has handled relations with North Korea—the administration will be taking some 40 U.S. companies on a trade mission to forge deals and discuss Chinese investments in the U.S.

One of the biggest deals up for discussion is an investment of around $7 billion by an alliance including China Petroleum & Chemical Corporation, or Sinopec, for an oil pipeline in Texas and an expansion of an oil storage facility in the U.S. Virgin Islands, Bloomberg reports, quoting a person familiar with the proposal. The deal is likely to be in the form of a non-binding memorandum of understanding, not a definitive contract. According to insiders, the investment will still need a final go-ahead by both the U.S. administration and China.

Sinopec, in partnership with ArcLight Capital Partners—a Boston-based private equity firm focused on energy infrastructure assets—and with Connecticut-based Freepoint Commodities, is expected to propose a project for building a 700-mile-long pipeline from the Permian to the Gulf Coast and a storage facility at the Coast, according to Bloomberg’s source. Sinopec also wants to expand an oil storage facility on St. Croix, U.S. Virgin Islands.

Back in early 2016, ArcLight Capital Partners and Freepoint Commodities bought the idled storage terminals, refining units, and marine infrastructure located at Limetree Bay, St. Croix, from HOVENSA. The St. Croix Facility consists of some 32 million barrels of crude oil and petroleum product storage, idled refinery units with total peak processing capacity of 650,000 bpd, a deepwater port with nine ship docks, six tug boats, and various associated equipment and inventory.

LB Terminals—the company managed by ArcLight and Freepoint Commodities—wants to invest significant resources to revitalize the St. Croix Facility as a multi-purpose energy center, with an initial focus on crude oil and refined petroleum product storage. LB Terminals has already executed a 10-year lease agreement for 10 million barrels of storage capacity with Sinopec, the partners said in January 2016.

The potential Sinopec investment in U.S. energy assets and creation of jobs in hurricane-hit areas will not be President Trump’s only mission on his Chinese visit.

“This multi-sector mission will promote U.S. exports to China by supporting U.S. companies in launching or increasing their business in the marketplace, as well as address trade policy issues with high-level Chinese officials,” the Department of Commerce said, adding that due to the high interest and the significant number of applications received, it decided to accept more than 25 U.S. firms or trade associations as delegation participants.

According to Bloomberg, more than 100 U.S. companies have applied for the trade mission, and the Commerce Department will pick some 40 of them and announce their names soon. Companies tentatively listed as working on deals with China include General Electric, Westinghouse Electric, Alaska Gasline Development Corp, Cheniere Energy, and the Boeing Co, Bloomberg says, quoting a government document it obtained.

According to Reuters, energy firms dominate the provisional list of U.S. companies picked to accompany President Trump in China. A total of ten firms are listed—few of them confirmed to Reuters that they were getting ready to travel to China, but most declined to comment. The companies are Delfin Midstream LLC, Alaska Gasline Development Corp, Cheniere Energy, Texas LNG Brownsville LLC, Freepoint Commodities, Sempra Energy, SolarReserve LLC, Westinghouse Electric Co, Arclight Capital Partners, and Air Products.

Considering this lineup, it’s very probable that President Trump and the Commerce trade mission delegation will negotiate boosting U.S. LNG exports to China.

In April, the Commerce Department said “companies from China may proceed at any time to negotiate all types of contractual arrangement with U.S. LNG exporters, including long-term contracts, subject to the commercial considerations of the parties.”

During his visit to China last month, U.S. Commerce Secretary Wilbur Ross stressed again his intention “to reduce the trade deficit through increased exports of high-value U.S. goods and services to China and improved market access for U.S. firms.” The U.S. and China should work to overcome bilateral trade frictions through negotiation, the parties agreed, but Secretary Ross “reiterated the need for concrete deliverables and meaningful action on key issues.”

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