Q&A: What's Next for W.Va.'s China Energy Deal?

Feb 15, 2018

Brian Anderson, director of the Energy Institute at West Virginia University
Credit Jean Snedegar

November last year West Virginia's Commerce Department announced a deal with China Energy the biggest Chinese coal company, to invest billions in the state’s natural gas industry. A memorandum of understanding outlines a 20 year commitment to invest 83.7 billion dollars in the states shale gas industry. The deal didn’t happen overnight. Brian Anderson, founder and director of the Energy Institute at West Virginia University offers some insight into the deal and the company behind it.

Q: When did this deal with China Energy first hit your radar?

A: This partnership with the precursor company of China Energy, Shenhua -- one of the two companies that merged to create one energy company -- that partnership with WVU predates me at the university. It's been going on for about 15 years, developing technologies to convert coal to liquid fuels and also carbon capture and storage. We've had this relationship ongoing, but about three years ago we started developing some ideas for investment opportunities for a then Shenhua in West Virginia because of the resources that are here in the state.

Q: Commerce officials say projects are going to focus on power generation, chemical manufacturing, and underground storage of natural gas liquids and derivatives. So this idea of a storage hub is something you've really been focused on. The idea is that instead of simply exporting all out natural resources, we want to try to attract economic development here with this gas storage, correct?

A: That's exactly right. So instead of export the commodities, we have an opportunity for rebirth and adding value to the raw materials through converting them into a plastics. And then manufacturing, every time you add value, you add jobs and you add wealth, where are the resource is extracted.

So we're trying to set that course now with the storage hub -- a critical piece of the infrastructure that we don't have in the region. The major petrochemical hub in the United States, in Texas and Louisiana has this trading facility for the natural gas liquids where you can create a robust trading market. And that's what we don't have currently an Appalachia. And that's what we're trying to trying to build with the storage hub.

Q: You've said this could bring 100,000 jobs to the region.

A: The American Chemistry Council estimated that it would be about 101,000 jobs and about $36 billion of investment in the region just waiting to happen. The American Chemistry Council’s assumption is that we're successful in building this storage and trading hub.

Q: What kind of jobs are we talking about? Four-year degree jobs, associate's degrees? How do we prepare for this?

A: It is a mixture of four-year, associate's and trade jobs. The bulk of them will be associate's and trade jobs in manufacturing facilities. They're all permanent jobs and per the American Chemistry Council, very well-paying jobs. But it's specifically around a cracker facility to take the ethane and converted into the building material of plastics. And then it's all the derivatives of creating something from the plastics, whether it's diapers or toys and all along that pathway. It's that whole supply chain all the way from the crackers through the final manufacturing. But that adds up to the hundred thousand jobs.

Q: Won't all of these jobs be gone in 30 years to robots?

A: Well, certainly not all of them. I'm not ready to trust a driving my car to artificial intelligence quite yet. And I think that there's a not only the operation and maintenance jobs that will continue, but also the higher tech employment that leads to automation. We will need people who are skilled in computer programming and computer technicians as well, in supporting this advanced manufacturing.

And there are some real opportunities that are right in front of us now in advanced materials. The commodity chemicals that come out of the back of a cracker, those are pretty a widespread and ubiquitous, but it's the new materials that we're going to continuously be developing that adds value to this resource because it provides these new materials that go into light-weighting of vehicles.  Things like carbon fiber reinforced plastics that can help revitalize our road and bridge structures.

What is important to remember is, the farther down that supply chain you go toward the end product, the more people per pound of material it takes for that manufacturing to occur. So every step we take from the cracker than the plastics, composites and manufacturers, and then into the final products, every step, we're multiplying the number of people that are employed per pound of original ethane that we start with.

Q: There have been some folks from China Energy who have been touring the region. You've been involved with that. Can you tell us about your experiences?

A: Yeah, absolutely. China Energy’s investment portfolio that they had proposed to the state of West Virginia includes a number of different projects and all of these projects are in various stages of development, as has been announced. It includes natural gas power plants, as well as a chemical manufacturing facilities and interest in investment in the storage hub throughout the chemical manufacturing portfolio. There's a number of different projects and project teams from China Energy that are working on various stages of those projects and development. This is a bit of a different type of project development than we're used to in West Virginia. We’re familiar with Braskem and their announcement and trying to build the ethane cracker in Wood County, and usually with commercial development, a lot happens behind the scenes until they're ready to make the announcement. And then it's announced. And so you can imagine a portfolio of China Energy projects that are all working behind the scenes right now ready to individually be announced. And so that's what we're going to see over the course of the next 20 years or a number of different individual projects being announced.

Q: What else can you tell us about this company, the culture of the company, and what it is that they do?

A: Because we have a long history of working with China Energy and the Shenhua Corporation before them, we at WVU have had a very good opportunity to see behind the scenes the way that this company works. They are a state-owned enterprise, partially. 40 percent of the company is traded publicly in Shanghai and Hong Kong and they have been continuously progressing to look much more like a Western company than the traditional Chinese state-owned enterprises.

And what I mean by that is they're investing in research and development. They have a major R&D center in Beijing and another that they opened in Palo Alto next to Stanford University that are specifically focused on mostly environmental research in terms of carbon capture sequestration storage or CO2 conversion or in alternative energy. They have one of the world's biggest solar panel research facilities for the development of solar electricity.

They're also the largest solar company in the world in terms of the amount of a solar and also the wind power that they generate. And so this is a company that is not foreign to renewable energy investments. They also operate a much more like a vertically integrated company, through their entire supply chain. And that's why they're interested in a portfolio of projects all along the supply chain, because there's economic benefit for them. And for us it means just more investment and more manufacturing here in the state.

I think that there's a lot of potential, a lot yet to be seen in terms of these projects coming to fruition. China Energy is certainly an indicator that Appalachia and West Virginia is a good place for investment. And we want to continue that, not just with China energy but other companies around the world.