U.S. Allies in Asia Snub Natural Gas From Alaska Project

TOKYO—Japan and South Korea have rebuffed U.S. overtures about joining a proposed $44 billion Alaska natural-gas project that would be one of the biggest energy investments in American history.

The snubs have put a roadblock in front of a liquefied natural gas project that has made strides recently. Washington says exporting gas from Alaska would strengthen global security by giving Asian nations an alternative to Russian gas. 

The plan, called Alaska LNG, features an 807-mile pipeline that would carry natural gas from fields north of the Arctic Circle to the southern part of the state, from which it would be shipped primarily to Japan, South Korea and other countries in Asia.

The project won a green light from the Energy Department in April and aims to begin operating by around 2030. Under federal law, it is eligible for more than $30 billion in loan guarantees. 

After more than a decade of planning, the project is closer than ever to launching, said Sen. Dan Sullivan (R., Alaska). The next step, he said, is lining up buyers in Asia. 

“That private sector component is really important and that is happening as we speak,” he said.

But people familiar with the plans of several top prospective buyers in Japan and South Korea said the companies expressed they weren’t interested in investing in the project or signing contracts to purchase its gas, and energy officials also have given Alaska the cold shoulder.

Potential buyers aren’t confident in the project’s timeline, according to officials at companies and in the Japanese government. They believe that Asian countries will have other sources of stable natural-gas supplies by 2030, although the gas market is volatile and competing projects also carry risks. 

The Asian buyers also are concerned about the lack of major investment commitments by big U.S. energy companies to the Alaska project, these officials said. Exxon Mobil handed over the project to the state of Alaska in 2016. It has remained involved in other ways, such as advising on how the project could be made more competitive. 

Over the past year, officials from Alaska Gasline Development, the company behind Alaska LNG, and other advocates have pitched the project to Japanese and Korean government leaders and potential buyers at meetings in Tokyo, Seoul and Washington, D.C. 

The community of Nikiski on Alaska’s Kenai Peninsula south of Anchorage would serve as the endpoint of the gas pipeline, which in parts follows the route of the Trans-Alaska Pipeline, for oil. At a facility in Nikiski, the gas would be chilled to liquid form at minus 260 degrees Fahrenheit and loaded onto tankers.

Japan and South Korea, both U.S. allies, are two of the world’s biggest importers of liquefied natural gas. Both still rely on Russian LNG in part to keep the lights on and businesses running.  

Alaska’s U.S. senators, both Republicans, and U.S. ambassadors in Japan and South Korea representing the Biden administration say the project would link the U.S. and allies more closely while sidelining Russia. 

“It is imperative that our allies in Asia, Korea and Japan, get off of Russian oil and gas,” said Sullivan, the Alaska senator. “The most obvious choice with which to do that is a fully permitted West Coast of America project.”

Japan purchases about 10% of its LNG supply from Russia’s Sakhalin-2 project. With current contracts due to expire by around the end of this decade, it is in the market for new suppliers.

For Japan, buying from Alaska “means long-term energy reliability from the number-one reliable ally,” said the U.S. ambassador in Tokyo, Rahm Emanuel.

Shipping LNG to Japan from the Middle East or from the U.S. Gulf Coast via the Panama Canal typically takes several weeks. From Alaska, LNG can be shipped to Japan in seven days and to South Korea in eight, with “zero strategic choke points,” said Emanuel. 

However, LNG consumers in Asia say they are looking for supply contracts that could provide gas in the next three to four years, when supply conditions are predicted to remain particularly tight. Other projects in places such as Canada and the Gulf Coast promise to deliver on a quicker timeline, they say. 

Japanese officials said the farther out a project’s timeline extends, the greater the worry that it would bump up against the country’s commitment to have zero net carbon emissions by 2050. 

“People are so unsure about the future of LNG. As of now they see huge demand, but what will happen 10 years or 15 years from now remains a question mark,” said Tatsuya Terazawa, head of the government-affiliated Institute of Energy Economics Japan.

After starting major permitting efforts in 2014, the Alaska LNG project struggled for years to make progress. At the time, other U.S. export projects were fueling a boom in global natural-gas supply. In 2019, Alaska Gasline Development said it was scaling back operations while evaluating the project’s viability.

Last year, natural-gas prices surged after Russia cut off gas supplies to Europe, and buyers have been looking to secure new supplies. Still, officials in Japan said the Alaska project compared unfavorably with others.   

“The most important thing for buyers is evaluating how feasible an LNG project is, and with Alaska LNG, we’ve seen too little progress for too long,” said an official in charge of LNG projects at one of Japan’s top importers.

People at Alaska Gasline Development said a number of potential participants in Japan and South Korea are closely examining the project. Frank Richards, president of Alaska Gasline Development, said he has shown potential Asian participants around Alaska’s northern gas fields to demonstrate the project “really is ready, viable and doable.”

Richards said “there are tremendous amounts of capital ready to be deployed” and Alaska Gasline Development aimed to finish raising capital this year. He said it hoped to reach a final investment decision during the first quarter of 2025.

—Dasl Yoon in Seoul contributed to this article.

Write to River Davis at [email protected] and Sylvan Lebrun at [email protected]