Alaska LNG back in spotlight as Iran war disrupts Middle East supply

Donald Trump's long-pursued vision of developing Alaska as a major LNG export hub is drawing renewed attention as the war with Iran disrupts Middle East gas supplies. Proponents argue that Alaska's shorter shipping distance to Asian markets such as South Korea and Japan gives it an edge over Middle Eastern sources, but analysts say the projects face formidable obstacles — including a combined price tag of up to $80 billion, unresolved financing and complications from Russia sanctions.

According to the Financial Times on Sunday (local time), two US energy developers — Glenfarne Group and Gentry Beach — are each pursuing large-scale LNG projects in Alaska.

Glenfarne's Alaska LNG project carries an estimated cost of $54.5 billion, while Gentry Beach's Polar LNG is valued at $25 billion. Together, the two ventures would require up to $80 billion in investment.

Both companies say interest in Alaskan LNG has grown as the Iran war has disrupted Middle East supply chains. LNG produced in Alaska can reach major Asian markets, including South Korea and Japan, in just over a week — a shorter transit than from the Middle East.

But significant hurdles remain before either project becomes a commercial reality.

Of the two, Alaska LNG is the more advanced. It envisions building a roughly 1,190-kilometer pipeline from the North Slope gas fields in northern Alaska to Nikiski in the south, along with a liquefaction facility with an annual capacity of 20 million tons.

ExxonMobil, BP and ConocoPhillips were originally involved but all withdrew in 2016 over cost concerns. The Alaska Gasline Development Corp., a state-owned entity, subsequently took over, and Glenfarne acquired the project last year.

Cost remains the single biggest obstacle. Pipeline construction alone is estimated to require about $17 billion. Alex Munton, an analyst at Rapidan Energy Group, said ExxonMobil and North Slope producers had examined the project closely and concluded it did not work for them, pointing to the risk of cost overruns.

The project's timeline has also slipped. The Alaska state legislature failed to pass a related tax-incentive bill last month, delaying the first phase of pipeline construction. Glenfarne also needs to secure additional long-term purchase agreements for 3 million tons of LNG per year before it can make a final investment decision on the liquefaction facility.

Polar LNG, at $25 billion, is at an even earlier stage. The project would move gas produced on the North Slope to the coastal village of Wainwright for liquefaction and export.

Russia presents a separate complication. To cut costs and construction time, Polar LNG is exploring the use of technology and equipment that Russian energy company Novatek deployed in its Arctic LNG operations.

Some of Novatek's projects are subject to US and European sanctions, making it difficult to use the related equipment without US government approval. The United States and Russia are said to have discussed leasing Novatek's technology and equipment to Polar LNG, but Congress is moving in the opposite direction — advancing legislation that would tighten sanctions against Russia.

Efforts to attract Asian investors have also stalled. According to the Financial Times, South Korea's Posco Group is currently the only Asian company to have taken an equity stake in either project. South Korea and Japan agreed last year to strategic investment frameworks with the United States worth $350 billion and $550 billion, respectively, but neither country has yet allocated funds specifically for Alaska LNG.

The political calendar adds another layer of uncertainty. Developers are under pressure to advance the projects to a point of no return before the Trump administration — which has championed pro-fossil-fuel policies — ends in 2029. Should the Democratic Party return to power, the projects could be halted on environmental grounds.

"Alaska oil and gas is a sensitive issue, and there is political risk attached to it," Munton said.