Alaska LNG: A path to U.S. energy dominance, or a dead end?

The ambitious Alaska LNG project is once again under investors’ scrutiny. This time, however, it is because of concerns over U.S. tariffs, which are prompting Asian trading partners to reconsider their involvement in the major energy project in Alaska. The pipeline link between Arctic fields and liquefaction terminals in the south is therefore gaining new momentum, CNBC reported.

The Alaska LNG project is a major U.S. liquefied natural gas (LNG) export initiative aimed at connecting the rich fields on Alaska’s North Slope—specifically the Prudhoe Bay and Point Thomson deposits—with export infrastructure in the south of the state.

Estimates put proven reserves at approximately 1 trillion cubic meters, while the region’s total potential could reach as much as 6 trillion cubic meters. A key part of the project is the construction of a 1287-kilometer pipeline that would connect these fields with the port of Nikiski, the longest-operating LNG terminal in the United States.

In addition to the scale of its reserves, the project’s main advantage is its strategic location relative to Asian markets, which are among the world’s largest LNG consumers. Compared with other U.S. projects, Alaska LNG offers shorter shipping routes to Japan, South Korea and China. Other advantages include stable regulatory conditions in the United States, a strong emphasis on safety standards, and Alaska’s cold climate, which improves efficiency and reduces the energy required to liquefy gas.

Current situation

For Donald Trump, the project is a national priority and an important part of his so-called “U.S. energy dominance” agenda. As Alaska Governor Mike Dunleavy has noted, an LNG tanker from Alaska could reach Japan in about eight days. That is significantly less than the longer and more complicated route from the Gulf of Mexico, which passes through the congested Panama Canal.

The Trump administration is now apparently putting pressure on Japan, South Korea and Taiwan to invest in the project. Although construction permits are ready, Alaska LNG faces a number of obstacles. According to Bob McNally, a former energy adviser to President George W. Bush, Asian partners may be reluctant because of the project’s high costs, complexity and risks.

The project’s economics are a particular source of doubt. Analysts say Alaska LNG lacks a strong business case. If it had one, the project would most likely have attracted broader support earlier. Many Asian buyers see Gulf Coast alternatives as more attractive, since they offer lower costs and better infrastructure.

Construction costs exceed 40 billion dollars, but experts warn that this figure is already outdated and will probably need to be increased significantly. Munton points out that the project will likely require public financing or direct government support. Governor Dunleavy nevertheless believes the project can succeed without a government subsidy, thanks to its inherent competitiveness, geopolitical importance and changing international relations.