LNG summit in Japan promotes Alaska’s $39 billion North Slope gas project

The head of Alaska’s gas line agency and other officials met with Japanese energy and government representatives in Tokyo on Oct. 24 to discuss the prospect that liquefied natural gas from Alaska’s North Slope could be produced and shipped to Japan.

The summit was convened by Rahm Emanuel, the U.S. Ambassador to Japan appointed by President Joe Biden.

The state’s proposed $39 billion Alaska LNG project has been seeking investors and gas buyers. The project would ship North Slope natural gas 800 miles to Nikiski in Southcentral Alaska, for liquefying followed by shipment overseas.

Energy analysts interviewed for this story were not optimistic about the chances of Alaska LNG successfully competing against other projects. Alaska officials said they see a new opportunity for the state’s long-sought gas line project, now that Russia’s invasion of Ukraine has upended the global market for natural gas.

Participants at the meeting included INPEX, a prominent oil and gas explorer from Japan, Tokyo Gas, a gas distribution company, JERA, Japan’s largest power generation company, and Mitsubishi Corp., a global corporation which sees liquefied natural gas as a steppingstone to a carbon-neutral future.

[As energy markets spiral up, a gas pipeline could be closer than ever, Alaska politicians say]

Frank Richards, president of the Alaska Gasline Development Corp. leading the Alaska LNG project, as well as Republican U.S. Sen. Dan Sullivan, attended the meeting in-person. Sullivan issued a statement saying it was imperative for America’s European and Asian allies to stop buying Russian oil and gas, creating an opportunity for Alaska LNG.

The meeting was “an important step forward in the ongoing dialogue to develop a strong privately led partnership to successfully develop and operate Alaska LNG,” Gov. Mike Dunleavy and Richards said in a joint statement.

Sullivan is also traveling to South Korea after the Japan summit “where he is meeting with high-level government and industry officials to stress that Alaska LNG is part of the solution to get off of Russian oil and gas,” Sullivan’s office said in an emailed statement on Tuesday.

Dunleavy, a Republican who traveled to Japan early this summer to meet with potential gas buyers and government officials, attended the Oct. 24 meeting by videoconference. Also attending remotely were U.S. State Department officials Amos Hochstein, the agency’s senior advisory for energy security and Geoffrey Pyatt, the agency’s assistant secretary for energy resources.

Similar private and state-led gas line projects to commercialize North Slope gas have failed for decades. Oil producers reinject the gas underground to produce more of the valuable oil. But oil production has dwindled over decades on the North Slope, opening the door for gas exports.

Energy analysts for global firms said the Alaska LNG project faces stiff competitive challenges due in part to high costs of building in Alaska. Also, the price of constructing the giant pipeline is one major burden, especially in an era of rising costs, they said.

“$39 billion is a lot of money” said Pavel Molchanov, part of the energy research team at Raymond James & Associates, a financial services firm.

Alaska’s project is not commercially viable, he said. Many other less expensive projects around the world are already potential LNG suppliers to Japan and other Asian countries, he said. And it’s possible that the cost of Alaska’s mega-project will be much higher than billed, a common outcome for big projects, he said.

Alaska LNG has made progress in recent years, lowering its costs and receiving certification from the Federal Energy Regulatory Commission, said Anusha de Silva, associate director of North America gas, power, and energy futures at S&P Global Commodity Insights.

“However, from a U.S. perspective, this project remains in relatively early stages, and we maintain the view that other factors will continue to influence the project’s progress,” de Silva said in an email. “In particular, the investment required to build the proposed (roughly) 800-mile pipeline to deliver feedstock gas from the North Slope to the export plant has been a major factor challenging the project’s advancement.”

Japanese utility contracts to buy Russian gas are set to expire in the coming years, said Ian Nathan, director of gas and LNG Research at Energy Intelligence, providing research and data to the energy industry.

But Alaska LNG faces a long list of hurdles — if the chance to replace that gas arises — including its feasibility.

“The challenges that have faced this project for so many years are still very real,” Nathan said.