Alaska LNG Costs Could Double Amid Trump Push

Donald Trump on a campaign trip to Alaska. (Reuters-Yonhap) A report has been belatedly confirmed indicating that the cost of the Alaska liquefied natural gas (LNG) project, which United States President Donald Trump is pressuring South Korea to invest in, could swell by up to twofold. In a report submitted to the Alaska State Legislature’s Legislative Budget and Audit Committee in December last year, energy consulting firm GaffneyCline analyzed, “The biggest obstacle to this project is the high capital cost and the resulting risk of cost escalation.” The report diagnosed that although several project cost evaluations have been conducted over the years, all of them remained at ‘Class 5,’ an initial feasibility review stage. Class 5 estimates, which have not gone through Front-End Engineering Design (FEED), have a margin of error ranging from -50% to +100% compared to the actual cost. This means that once the project goes into full swing, the cost could increase up to twice the current estimate. GaffneyCline expressed concern, stating, “There remains significant uncertainty in the existing project cost estimates,” and added, “Due to changes in market conditions, including the rise in LNG-related costs, the reliability of the estimates is further decreasing as time passes.” The firm then emphasized that in order to determine the economic viability of the project, the scale of investment costs must first be finalized through Front-End Engineering Design. In June, Glenfarne, the lead developer of Alaska LNG, estimated at the Alaska State Senate Finance Committee that this project, with an annual production capacity of 20 million tons, would cost $44.5 billion to $54.5 billion. However, it is pointed out that this also largely remains a mere initial estimate. The Alaska LNG project is a large-scale energy project that sends natural gas from the North Slope gas field in northern Alaska to Nikiski in the south through an approximately 1,300-kilometer gas pipeline, and then liquefies it to export to Asia. The South Korean government has not yet decided whether to invest. President Trump announced on June 30 that South Korea plans to invest up to $200 billion in United States energy projects, and out of this, approximately $54 billion will go into the Alaska LNG project. However, this is not an agreed upon matter between South Korea and the United States. The government maintains the position that the business viability must be examined first. Going forward, how much the costs will change after going through precise design and business viability verification is expected to be a key variable in investment discussions.