South Korea is treading carefully around the proposed Alaska liquefied natural gas (LNG) project, even as U. S. President Donald Trump pushes it as a centerpiece of Seoul's promised $200 billion investment in the United States. Trump has indicated that both nations are considering working together on the $50 billion endeavor. However, South Korea's participation hinges on whether the project makes financial sense and meets legal standards.
The plan for the Alaska LNG project involves moving natural gas along an 800-mile pipeline from Prudhoe Bay on Alaska's North Slope to a liquefaction facility in Nikiski. This is according to the Alaska Gasline Development Corporation. The project aims to churn out 20 million metric tons of LNG each year, with estimated costs ranging from $44.5 billion to $54.5 billion, as
Transporting LNG from Nikiski to South Korea is expected to take between seven and nine days, a significant cut from the 20 to 30 days required from the U. S. Gulf Coast. This shorter journey could slash transportation costs and sidestep geopolitical chokepoints such as the Strait of Hormuz, according to a professor at the Department of Future Energy Convergence at Seoul National University of Science and Technology.
Yet, building a 1,300-kilometer pipeline from Alaska's North Slope to the liquefaction terminal is no small feat financially. "The economics of Alaska LNG is expensive given the long pipeline versus other LNG projects, " commented Kit Ling Wong, head of business intelligence for Asia Pacific at Poten & Partners. She pointed out that LNG from Australia, the U. S., and Qatar might be cheaper options.
For South Korean buyers, a key issue is whether the shorter shipping route can deliver a competitive landed LNG price compared to options like LNG Canada, the U. S. Gulf Coast, and supplies from the Middle East. This view was shared by Kpler's Katayama, who noted that the hefty capital expenditure could be a sticking point.
South Korea's cautious approach is also due to fears of cost overruns and uncertainty about long-term LNG demand. The lengthy construction period and tough terrain might push costs up, while a slowdown in demand could tie buyers to unfavorable take-or-pay contracts for 20 years or more. Katayama mentioned that a predicted drop in gas demand from South Korea's power sector is making buyers wary of long-term LNG deals.
Strategic and Commercial Considerations
South Korea needs to balance its strategic and trade ties with the U. S. against the project's commercial feasibility. By focusing on financial viability, Seoul might negotiate for extra U. S. guarantees or financial backing, according to Yoo from Seoul National University of Science and Technology.
The ultimate test for South Korean buyers and investors will be the landed cost of Alaska LNG after factoring in feedgas, pipeline, liquefaction, financing, taxation, and shipping costs. Greater clarity on the project's fiscal structure, financing, construction, and permitting risks, as well as the level of U. S. government support, will be vital.
As of now, South Korean commercial involvement in the project is still in the early stages. POSCO International has a non-binding agreement to potentially buy 1 million metric tons of LNG annually for 20 years and supply steel for the pipeline. This deal is separate from any larger South Korean government investment pledge, according to Katayama.
More U. S. government support, including tax incentives and financial aid, would be crucial, along with opportunities for South Korean firms to be involved in the project's construction, engineering, equipment supply, and LNG shipping, rather than just being LNG buyers, Yoo added.
