Controversy continues to swirl around the Alaska liquefied natural gas project, floated as a destination for South Korean investment in the United States. Critics say the enormous infrastructure spending required makes the project more than twice as costly as existing U.S. LNG ventures, while the developer counters that cheap shipping gives it ample competitiveness. The project appears to be gaining momentum with political backing ahead of the U.S. midterm elections in November, though analysts warn that deeper political involvement could weigh on the venture over the long term.
Glenfarne Group, the lead developer of the Alaska LNG project, estimates the total cost at $44.5 billion to $54.5 billion, according to Reuters and other outlets on the 4th. That translates to roughly $2.2 billion to $2.7 billion per million tons of annual LNG capacity, the highest among U.S. LNG export projects. U.S. LNG projects approved after Russia's invasion of Ukraine were generally built for less than $1 billion per million tons, putting Alaska's cost at more than double that level.
Much of the price tag stems from the burden of building infrastructure. The Alaska project requires laying a new pipeline stretching about 1,287 kilometers from the North Slope in the north to Nikiski in the south. The pipeline alone is expected to cost $13.2 billion to $16.9 billion. Separate facilities must also be built to process the natural gas before export. Gas treatment plants are projected to cost $7.7 billion to $9.2 billion, and the liquefaction terminal $23.6 billion to $28.4 billion. Alex Munton, head of research at Rapidan Energy Group, said the project may fail to meet the commercial standards needed to justify investment.
Offsetting the high upfront investment requires correspondingly strong returns. But analysts question whether the project can secure sufficient market demand if those costs are passed through to sale prices. Jason Feer of energy consultancy Poten & Partners said the question is whether Asian buyers are willing to pay a premium in exchange for supply security, adding that he has seen no evidence so far that they are.
Others push back, arguing that judging the economics on upfront investment alone is misleading. Because the Alaska project includes the cost of building a pipeline and gas facilities from scratch, they say, it cannot be compared directly with ventures that use existing infrastructure.
Alaska's geography is cited as its biggest strength. Distances to major LNG importers including South Korea, Japan and Taiwan are far shorter than from the U.S. Gulf Coast, sharply reducing shipping costs. Once the project is complete, the cost of shipping LNG from Alaska to Asia is estimated to be at least 65% cheaper than from the Gulf Coast. Proponents argue that while upfront investment is higher, the project is competitive once delivery costs to Asian markets are factored in.
Views also diverge on demand. Glenfarne said it has identified potential customers for 13 million tons of LNG a year, about 81% of the 16 million tons annually needed to secure project financing.
But critics note that the several purchase agreements signed with Asian companies so far are non-binding. Forecasts of a sharp increase in LNG supply add to the concerns. Some 345 million tons of new LNG capacity is expected to come online worldwide by 2030, according to Bloomberg, equivalent to about 80% of current global demand. Canada, Mozambique, Papua New Guinea and Argentina are also pursuing supply expansions aimed at Asian markets.
Political controversy around the project is also growing. Bloomberg described Alaska LNG as more than an energy venture, saying it has taken on the character of a political project tied to the November midterm elections. Political support has breathed new life into a venture that drifted for decades, but analysts say a growing perception that it is being driven by political necessity rather than economics could instead become a drag on investment decisions.
President Donald Trump's renewed invocation of tariffs while pressing South Korea to participate has drawn scrutiny as well. Asked on the 2nd about South Korea's failure to agree to invest in Alaska LNG, Trump said that if they do not want to, that is fine, and that he can simply impose more. He added that they should be told the figure will be doubled if they do not sign soon. He did not specify what would be doubled, but appeared to be referring to tariffs. Britain's Guardian criticized Trump's tariff claims, noting that tariffs are a tax paid by U.S. importers.
