U.S. President Donald Trump has expressed a desire to promote the Alaska liquefied natural gas (LNG) project, and the South Korean government has shown interest in joint development, while our country's corporations are contemplating their participation. The Alaska project has the advantage of securing a stable supply of LNG from the U.S., but the development and transportation expenses have risen sharply, making profitability uncertain. It takes over 10 years from development to supply, and potential lawsuits due to environmental destruction are also a concern.
According to the energy industry on the 4th, Minister of Trade, Industry and Energy An Duk-geun visited the U.S. on the 26th of last month to meet with U.S. Secretary of Commerce Howard Rutnik and Chairperson Doug Burgum of the White House National Energy Council, where he reportedly expressed interest in participating in the Alaska LNG project. Prior to this, the U.S. government was known to have requested South Korea's participation in the project. The government is negotiating exemptions from tariffs based on the expansion of imports of U.S. energy.
The Alaska LNG project is a project to develop natural gas from a gas field with reserves of 40 trillion cubic feet (ft³) located in Prudhoe Bay in northern Alaska. It involves transporting natural gas through a 1,300 km pipeline to the Nikiski export terminal near Anchorage, converting it to LNG, and selling it to Asia. The initial project expense is expected to be about $45 billion (approximately 64 trillion won). The areas the pipeline traverses are all Arctic wildlife sanctuaries.
The Alaska LNG project has been discussed since the 1970s but has been repeatedly suspended and resumed due to economic viability and a lack of infrastructure. In 2010, it materialized with the participation of multinational energy corporations such as ExxonMobil and BP, but withdrew as LNG prices plummeted at that time. Since then, the Alaska state government has been pursuing it independently, seeking new partners.
The Alaska LNG project is one of Trump's promises for energy independence. Currently, LNG is exported from the Seward and Anchorage areas of Alaska to the Asian market, but export volumes are not large. If the Alaska LNG project is completed, the U.S. will secure competitiveness in the global energy market. By controlling LNG export volumes, it may also exert pressure on major LNG importing countries like China.
The U.S. government reportedly wants Northeast Asian countries to not only import Alaska LNG but also invest in equity in the project. It is said that corporations should explore, drill, and purchase gas fields directly. Among South Korean corporations that are potential participants are Korea Gas Corporation, POSCO INTERNATIONAL, and SK E&S. If these corporations participate in the Alaska LNG project, they are expected to start with economic feasibility assessments.
The issue is economic viability. After COVID-19, raw material and construction expenses have risen, causing the expense of LNG drilling and development to double. The prices of LNG terminals and transport ships are also on an upward trend every year. On the other hand, LNG has high price volatility, making it difficult to predict market conditions. Typically, LNG development projects take over 10 years, and if the project starts during the Trump administration, there could be setbacks when a new administration takes over.
The Biden administration in the U.S. promised large tax credits for South Korean corporations to build electric vehicle and battery production plants in the U.S., but a similar situation could arise later, as the Trump administration tried to eliminate tax credit benefits. Concerns also include damage to corporate image due to environmental destruction and lawsuits with environmental organizations.
An industry insider said, "The expense of building LNG terminals and the price of ships to transport them have also risen significantly. Given the current LNG price trend, it is not easy to enter new developments." Another insider noted, "LNG takes a minimum of 15 years from development to commercialization, so after the Trump administration ends, the direction of the project may change. If pursued at the government level, it could be considered, but currently, the likelihood of participation is low."
Industry insiders predict that instead of immediately participating in the LNG project, Korea Gas Corporation will express its intention to expand the introduction of U.S. LNG and start tariff negotiations. LNG import contracts are usually long-term, lasting over 10 years, and the timing of the expiration of Korea Gas Corporation's long-term contracts with Qatar and others is approaching.
The government plans to form a practical consultative body with the U.S. side to discuss issues related to the Alaska LNG project.