Alaska LNG Project Faces Scrutiny Over Costs Exceeding Double Its Gulf Coast Rivals

A U.S. administration initiative to direct a potential $54 billion of South Korean investment toward the Alaska LNG project is intensifying scrutiny of the facility's high development costs, which are estimated to be more than double those of competing U.S. Gulf Coast plants. The proposal has cast a new light on the 20-million-ton-per-annum (mtpa) project's commercial feasibility, with Seoul stating it would first review its viability before committing funds.

High Costs Raise Economic Questions

The lead developer, Glenfarne Group, estimates the total cost for Alaska LNG will be between $44.5 billion and $54.5 billion, according to a Reuters report. This translates to a capital cost of roughly $2.2 billion to $2.7 billion per mtpa of capacity, a figure substantially higher than other U.S. LNG export projects.

By comparison, recent LNG facilities on the Gulf Coast have been developed for about $1 billion per mtpa or less.

• Cheniere Energy's Corpus Christi Stage 3 expansion was estimated at approximately $760 million per mtpa.
• Venture Global's Plaquemines LNG project cost around $1.05 billion per mtpa.
• Other projects from NextDecade and Woodside Energy have also been developed near the $1 billion-per-mtpa threshold.

The Alaskan Infrastructure Challenge

Ad

The project's high price tag is driven by its extensive infrastructure requirements, unlike Gulf Coast terminals that can tap into existing pipeline networks. A significant portion of the cost is for an 800-mile pipeline to transport gas from the North Slope to a liquefaction terminal in Nikiski, estimated to cost between $13.2 billion and $16.9 billion.

In addition to the pipeline, the project requires a large gas treatment plant on the North Slope, with an estimated cost of $7.7 billion to $9.2 billion. The liquefaction terminal itself is projected to cost between $23.6 billion and $28.4 billion, according to Glenfarne's estimates.

Market Outlook and Strategic Considerations

Analysts are questioning whether the project can attract the necessary investment. Alex Munton, director of global gas and LNG research at Rapidan Energy Group, told Reuters the project "may not be able to meet commercial thresholds for investment." The core debate centers on whether Asian buyers will pay a premium for the project's strategic advantages.

Supporters argue that Alaska LNG's location offers shorter shipping times to key Asian markets like Japan and South Korea, reducing transportation costs and enhancing supply security. However, Jason Feer, head of business intelligence at Poten & Partners, noted, "The question is whether Asian buyers are willing to pay a premium in exchange for security of supply. So far, we have not seen evidence of that." Other analysts also point to potential competition from Canadian projects in the region.