The Alaska LNG project is about more than economics. It has to be, because the economics are challenged, to put it mildly.
US President Trump and Alaska Governor Dunleavy are pushing hard to find partners in Asia to develop a massive LNG project in Alaska.
At the highest level, US political leaders want to build an 800 mile pipeline to carry gas from the prolific fields of Alaska’s North Slope down to a new liquefaction facility on Alaska’s southern slope.
The LNG would then mostly travel across the Pacific Ocean, presumably to buyers like Japan and South Korea.
The price tag?
$44 billion.
And that’s before anything has been approved and any activity has commenced.
LNG projects, like many one-off, large-scale infrastructure projects, often fall behind schedule and exceed their budgets.
The risks for the Alaska LNG project are larger than for the projects we see on the Gulf Coast, where weather conditions are much more palatable, and a large, highly-trained workforce already exists and is steadily accumulating experience.
This Wall Street Journal piece notes the governor’s transition from skepticism to optimism around this project:
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When Dunleavy ran for governor in 2018, he was “absolutely a skeptic.” But he changed his mind as supply chains were rewired after the pandemic, wars raged in Europe and the Middle East, and an artificial-intelligence boom heightened the need to avoid power outages.
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If the project was simply about economics, it would be difficult to justify.
The Gulf Coast offers so many advantages in terms of bringing gas to international markets.
But Alaska has proximity to Asia, where the appetite for gas is expected to grow meaningfully in the years ahead.
Also, with the Trump administration’s focus on eliminating trade deficits, LNG purchases offer a way for foreign countries to literally buy goodwill from Washington.
Another challenge for the project is it would not come online until 2031, beyond the expected near-term rapid rise in electricity demand.
It’s just a slow, expensive process to build out new natural gas infrastructure.
And there are lots of reasons to believe Alaska LNG could be slower and more expensive than most other similar projects.
Still, the project is about more than economics.
There are real geopolitical implications…implications that are much more salient today than they’ve been for much of the recent past.
It seems like it’ll be difficult to mitigate the risk to a degree that actually gets this progress off the ground.
But it’s an excellent demonstration of the unique times we live in, where something like this is being discussed so seriously.