Alaska LNG Project Becomes $54 Billion Investment Battleground for Asian Energy Buyers Amidst Global Supply Concerns

A substantial liquefied natural gas (LNG) project in Alaska has unexpectedly become a central point for purported foreign investment, as Asian nations seek to diversify their energy imports amidst ongoing disruptions linked to the Iran war. During an event in Wasilla, a town located 70km north of Anchorage, on Tuesday, US President Donald Trump announced that Taiwan had agreed to acquire 30 percent of the LNG from the long-planned Alaska LNG project. Commerce Secretary Howard Lutnick further stated that Taiwan had committed to investing $4.4 billion in the development of the pipeline. The specific terms of this agreement were not immediately disclosed.

The previous week, President Trump had announced a $54 billion South Korean investment in Alaska LNG, presented as part of a broader $200 billion energy package and a $350 billion trade deal finalized last year, aimed at reducing tariffs on Korean imports. However, South Korea has since refuted this claim, asserting that no firm commitment has been made regarding the project. An article titled “US LNG emerges as Gulf hedge against Hormuz disruption” provides further context.

“There are no investors other than the US government, and there are no buyers who have committed to signing any sales and purchase agreements,” commented Ira Joseph, a global fellow at the Centre on Global Energy Policy at Columbia University. The project aims to reach a final investment decision on the pipeline this year, with a separate decision for the export terminal anticipated in 2027. A significant factor influencing these publicly stated claims appears to be the upcoming November 3 midterm elections, with Alaska serving as a crucial battleground state for control of the US Senate. President Trump’s visit to Wasilla on Tuesday highlighted the election’s importance as he endeavors to boost energy exports and attract foreign investment.

Concurrently, the Alaska LNG project presents substantial opportunities, as buyers in Southeast Asia are actively looking to diversify their energy sources due to the Iran war impacting regional shipments. Should the Alaska LNG project become operational, it could significantly shorten delivery times for LNG shipments. According to a 2023 report from the project's developer, the transit time from Alaska to Japan is over 9,600km less than from the US Gulf Coast.

Theory vs. Practicality

Despite its potential, the Alaska LNG project remains a long-term endeavor. Development is slated to occur in phases, with initial exports targeted for 2031. Glenfarne Group estimates the project's cost to be between $44.5 billion and $54.5 billion. This translates to approximately $2.2 billion to $2.7 billion per tonne per year of capacity, based on a Reuters analysis. “This is an expensive project that's going to take at best a lot of years to sort of come to fruition,” stated Rachel Ziemba, founder of the risk advisory firm Ziemba Insights.

An additional potential challenge involves the approximately 106cm-diameter pipeline, which would extend 1,300km from Alaska’s North Slope to Nikiski, south of Anchorage, running parallel to the existing Trans Alaska Pipeline System for oil. The proposed LNG facilities in Nikiski are projected to produce 20 million tonnes per year for export, with a daily capacity of 3.3 billion cubic feet. The pipeline itself, designated as Phase One, is estimated by the company to cost between $13.2 billion and $16.9 billion.

“If the gas is sitting right next to the LNG facility, this thing would have been built 40 or 50 years ago, but it's not, and … that's the difference maker in this project,” remarked Mr. Joseph. Investors continue to exhibit caution. As of January this year, only six non-binding offtake agreements have been secured, totaling 13 million tonnes per year. Competition also presents a hurdle, with other LNG projects in Canada and on the US Gulf Coast drawing significant attention. Major Middle Eastern energy players are increasing their focus on LNG, primarily through the Gulf Coast. This past summer, Adnoc's XRG increased its stake in NextDecade's LNG site in Rio Grande, Texas. QatarEnergy commenced LNG exports from its joint venture with Exxon at the Golden Pass project in March.

“It is notable to me that at a time where you know Trump is looking for all the finance he can for this project, that he's not turning to these sources of capital,” Ms. Ziemba observed.