Invest1 publisher3 min readPublished
Alaska LNG's export terminal alone costs more per ton of capacity than an entire recent US LNG plant
Glenfarne's $44.5 billion to $54.5 billion estimate puts Alaska LNG at more than double the cost of recent US projects per ton of capacity. The case for South Korean money now rests on cheaper shipping to Asia and pressure from Washington.
The Investor · Invest desk
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What happened
- Shipping LNG from Alaska to South Korea, Japan and Taiwan is estimated to cost at least 65% less than shipping it from the US Gulf Coast once the project is built.
- Glenfarne says it has found potential buyers for 13 million tons a year, about 81% of the 16 million tons it needs to secure project financing.
- Bloomberg expects 345 million tons of new LNG capacity to come online worldwide by 2030, equal to about 80% of current global demand.
- Asked on October 2 about South Korea's failure to agree to invest, President Trump said that was fine, that he could impose more, and that the figure would double if Seoul did not sign soon.
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Why it matters
- contradiction The defence that Alaska is unfairly compared with projects using existing infrastructure explains only the pipeline and gas plants, so the premium survives even on the like-for-like piece of the build.
- decision Seoul now has to weigh a tariff threat against the project's returns, so a Korean yes would tell investors more about trade policy than about whether Alaska LNG pays.
- exposure Until the Asian agreements become binding, any equity investor carries the demand risk on a high-cost project competing with new supply from four other countries for the same buyers.
Glenfarne's range is the sum of three line items, and they add up exactly [16]. The pipeline is $13.2 billion to $16.9 billion for about 1,287 kilometres of new line from the North Slope to Nikiski [4]. The gas treatment plants are $7.7 billion to $9.2 billion [5], and the liquefaction terminal is $23.6 billion to $28.4 billion [6]. Divide the total by the per-ton figure and the implied capacity is about 20 million tons a year at both ends of the range [17].
The project's defenders, as the Seoul Economic Daily reports them, say the comparison with other US projects is unfair because Alaska has to build its pipeline and gas plants from scratch while those ventures use existing infrastructure [22]. That is half right. The pipeline and treatment plants are about 47% to 48% of the budget [18]. Take them out and the terminal alone works out to about $1.2 billion to $1.4 billion per million tons of capacity [19]. US projects approved since Russia invaded Ukraine were generally built for less than $1 billion per million tons, everything included [3]. A recent US plant of the same size would come in under about $20 billion, all in [21].
So the argument moves to delivery. Proponents say the project is competitive once the cost of getting gas to Asian buyers is counted [23]. The shipping estimate is a percentage, and the report does not give a dollar cost per unit, so the published figures do not let anyone set the saving against a capital premium of this size. Jason Feer of Poten & Partners said the question is whether Asian buyers will pay a premium for supply security, and that he has seen no evidence so far that they will [8]. Alex Munton, Rapidan Energy Group's head of research, said the project may not prove commercially sound enough to warrant the investment [7].
The project can reach a financing decision by more than one route. Glenfarne could close its 3-million-ton shortfall [20] by turning the non-binding agreements it has signed with Asian companies into contracts [11], at which point Korean equity becomes optional for the financing. Seoul could invest under pressure; Bloomberg has described Alaska LNG as a political project tied to the November midterms [14]. Or buyers could wait, since Canada, Mozambique, Papua New Guinea and Argentina are all expanding supply aimed at the same Asian market [13].
I'd expect the second route. In my view any Korean commitment that comes will be priced as the cost of avoiding a tariff, with the project's own return a secondary line in the investment memo. The case against that view is binding offtake. If buyers sign for the missing tons at prices that carry the terminal premium, the shipping argument was right and the build cost mattered less than it looks. Until then, every dollar Seoul places in Alaska at $2.2 billion or more per million tons of annual capacity [2] is a dollar it does not place in US capacity built for under $1 billion [3].
What to watch
- Whether any of Glenfarne's Asian purchase agreements converts into a binding contract that covers part of the 3 million tons a year it still lacks.
- A published per-unit shipping cost from Alaska to Asia, the figure that would show whether the 65% saving offsets the capital premium.
- Seoul's formal response to Trump's tariff threat, and whether any commitment lands before the November midterms.