Japan has hired Wood Mackenzie to assess a proposed $44 billion Alaska gas pipeline and LNG plant, indicating potential support for the project championed by U.S. President Donald Trump.
This assessment aims to alleviate concerns among prospective Japanese investors and off-takers about the project, which has faced long-standing cost and logistical hurdles. The evaluation follows recent U.S.-Japan trade discussions where Tokyo agreed to explore an off-take agreement for Alaskan LNG and pledged significant investments in U.S. sectors.
Japanese officials and energy industry leaders have expressed reservations regarding the potential cost of the Alaska LNG project, which might render its gas supply less competitive than other sources, despite U.S. optimism.
Project developers have initiated discussions with several key Japanese firms, including JERA, Japan’s largest LNG buyer, Tokyo Gas, Osaka Gas, Mitsubishi Corp, and Inpex, an oil and gas explorer with significant government backing. JERA is reportedly “considering” the project, while Tokyo Gas identified itself as a potential procurement candidate.
Inpex has stated that no decisions have been made, and Osaka Gas and Mitsubishi have declined to comment. The project has already secured non-binding offtake agreements with Thailand’s state-owned PTT Group and Taiwan’s CPC Corp. Securing a deal in Japan is considered vital for the project’s success, given Japan’s status as the world’s second-largest LNG purchaser, a major investor in energy infrastructure, and its development into a gas trading hub capable of reselling U.S. gas to Southeast Asian markets.
Such an agreement could also unlock financing from Japanese state banks, such as the Japan Bank for International Cooperation (JBIC), which has indicated a willingness to provide support contingent on Japanese corporate involvement. U.S. officials have promoted the project’s security advantages for Tokyo, citing its proximity to Japan compared to Middle Eastern suppliers and its avoidance of sensitive maritime choke points like the Straits of Hormuz, Malacca, and the South China Sea. Japan procures approximately 10% of its LNG from the U.S., Russia, and the Middle East, with Australia supplying about 40%.
Wood Mackenzie’s studies on the Alaska LNG project over the past decade have yielded varied results, with a 2016 study ranking it poorly against competitors for Asian markets, whereas a 2022 review, factoring in different financing structures and cost reductions, found it competitive with U.S. Gulf Coast supply. Alaska LNG’s developers have engaged Australian engineering firm Worley to conduct a final cost estimate, with the objective of reaching a final investment decision by the end of the year.
based on an exclusive report by Reuters
