The Alaska liquefied natural gas (LNG) project by the U.S. Donald Trump administration, in which POSCO International is participating under POSCO Group, is facing difficulties.
POSCO International has expanded its participation in the Alaska LNG project, including by directly acquiring equity. However, the project's final investment decision (FID) has been repeatedly delayed as the project owner, U.S. energy developer Glenfarne, struggles with financing and securing LNG buyers.
According to the energy industry on the 26th, POSCO International increased its equity stake in the project's special-purpose company (Glenfarne Alaska Partners) from 1.17% at the end of last year to about 3.5% as of the end of the second quarter this year. The total equity investment is $35 million (about 48.5 billion won). Among foreign corporations that reached LNG purchase agreements with Glenfarne, POSCO International is the only one that also directly acquired equity.
The Alaska LNG project is a large-scale LNG development that refines natural gas produced from the Prudhoe Bay and Point Thomson gas fields in the North Slope of Alaska at a gas treatment facility and transports it through a new approximately 1,300-kilometer gas pipeline to Nikiski in southern Alaska. From a liquefaction plant to be built in Nikiski, the natural gas will be liquefied and supplied to Korea and other Asian markets through a marine export terminal. Annual LNG production and export capacity is up to 20 million tons (t). The goal is to make the first LNG export in 2031.
Glenfarne is leading the project with the Alaska Gasline Development Corporation (AGDC). Glenfarne Alaska Energy under Glenfarne and AGDC hold 75% and 25% equity, respectively, in their joint venture, 8 Star Alaska.
POSCO International secured a long-term (20-year) LNG purchase right of 1 million t per year. This came through signing a "strategic partnership heads of agreement (HOA)" with Glenfarne in December last year to import 1 million t of LNG annually. POSCO, the group's steel business affiliate, also agreed to supply steel materials needed to build the 42-inch high-pressure natural gas pipeline spanning 1,300 kilometers.
Hwang Eui-yong, an executive director at POSCO International, said at a conference held in Alaska in June, "We are participating broadly as a strategic partner, a steel materials supplier, and an LNG buyer in the Alaska LNG project."
However, the project has not gained momentum as Glenfarne's final investment decision has been postponed multiple times. Glenfarne initially planned to make the final investment decision by December last year, but it was delayed.
To make the final investment decision, 16 million t, or 80% of the total annual export volume of 20 million t, must first be secured under contract. Glenfarne has currently secured export volumes of 6 million t from Taiwan, 2 million t from Japan, 2 million t from Thailand, 2 million t from France, and 1 million t from Korea, totaling 13 million t. An additional 3 million t of export contracts are needed.
Whether the Alaska Legislature passes a property tax deferral bill is also cited as a variable. Alaska imposes an annual 2% property tax on oil and gas infrastructure. The Alaska State Government is pushing to defer property tax collection until the project enters commercial operation in consideration of operators' tax burdens, but the effort has been blocked by opposition in the Legislature concerned about reduced tax revenue.
Brendan Duval, Glenfarne's chief executive officer (CEO), said recently, "Once the tax-related bill under discussion in the Legislature is wrapped up, the final investment decision could be made."
If the Alaska LNG project moves into full swing, POSCO International will expand its LNG business to North America following Myanmar and Australia. The goal is to increase annual gas sales from the current 2.6 million t to 4.2 million t by 2031. North American LNG import volumes will be stored at the Gwangyang No. 2 LNG terminal, scheduled for completion within the year, after passing through the LNG-dedicated carrier first introduced last year and the Singapore trading subsidiary.
Han Seung-hoon, an analyst at Shinhan Investment & Securities, said, "Compared with Middle Eastern LNG, North American LNG is relatively free from geopolitical risks, so securing North American volumes is expected to drive growth in the scale of the LNG trading business."