Alaska LNG project costs could double initial $44.5B estimate, report warns

A report warning that the cost of the Alaska liquefied natural gas project could reach up to twice its initial estimate has come to light, raising fresh doubts about a venture widely cited at $44.5 billion or more.

According to reports Tuesday (local time), consulting firm Gaffney Cline submitted a report earlier this year to the Budget and Audit Committee of the Alaska State Legislature, warning that the project's cost estimate represents only a preliminary figure. The report said the current estimate is based on a Class 5 rating — the earliest stage of feasibility review, conducted before detailed front-end engineering and design.

At the Class 5 stage, cost estimates carry an error margin of minus 50 percent to plus 100 percent, meaning actual costs could run as high as double the current figure once the project moves forward in earnest. According to Reuters, Alaska LNG's lead developer, Glenfarne, had previously reported to the state legislature a cost estimate of $44.5 billion to $54.5 billion.

The project's cost structure is heavily front-loaded: 84 percent of total expenditure is concentrated in capital costs for infrastructure, including roughly 1,300 kilometers of pipeline. That outsized share of upfront capital investment has been identified as the single biggest obstacle to advancing the project.

The report recommended that the state government offer exceptional tax incentives and put in place legal and fiscal support measures to attract private investment and reach a final investment decision on a project of this scale. States on the US mainland — including Louisiana, Texas and Maryland — have previously secured private investors by offering property tax exemptions worth hundreds of millions to billions of dollars.

The report also pointed to the LNG Canada project as a comparable case, noting its similar project structure and terrain to Alaska. That project secured a final investment decision only after federal and provincial governments committed a combined 4 billion Canadian dollars ($2.9 billion) in support, including corporate tax reductions, provincial tax rebates, carbon tax exemptions and tax credits.