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Japan and South Korea decline offer to join $44 billion LNG project

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2023-07-28

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Japan and South Korea have rejected US overtures to join the proposed $44 billion Alaska natural-gas project, which could be one of the most significant energy investments in American history.

The project, known as Alaska LNG, involves an 807-mile pipeline transporting natural gas from fields north of the Arctic Circle to the southern part of the state. The gas would then be shipped primarily to Japan, South Korea, and other Asian countries, providing them with an alternative to Russian gas and enhancing global security, according to Washington.

While the Energy Department approved the project in April, it faces challenges in securing buyers in Asia. Companies and Japanese government officials expressed reservations about investing in the project due to uncertainties in its timeline. They believe that by 2030, there will be other stable sources of natural-gas supplies in Asia, though the gas market remains volatile.

Another concern raised by Asian buyers is the lack of significant investment commitments by major U.S. energy companies to the Alaska project. Exxon Mobil handed over the project to the state of Alaska in 2016 but continued to offer advice on enhancing its competitiveness.

The project's advocates have made efforts to pitch the Alaska LNG to Japanese and Korean government leaders and potential buyers, but the reception has been lukewarm. Despite being U.S. allies, Japan and South Korea remain major importers of liquefied natural gas from Russia.

Alaska's U.S. senators and U.S. ambassadors in Japan and South Korea argue that the project would strengthen ties between the U.S. and its allies while reducing dependence on Russian oil and gas.

However, Asian consumers seek supply contracts that can provide gas within the next three to four years, and competing projects in Canada and the U.S. Gulf Coast offer quicker timelines.

The Alaska LNG project faced delays and struggles for progress in previous years but has gained momentum recently. Alaska Gasline Development, the company behind the project, is working to raise capital and aims to reach a final investment decision by the first quarter of 2025. Despite the snubs from Japan and South Korea, they believe the project is ready, viable, and achievable.

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