Commentary

The view, from Asia, of Alaska’s natural gas pipeline

November 15, 2022 5:01 pm
U.S. Sen. Dan Sullivan, R-Alaska, speaks with Nathaniel Herz after the Alaskan LNG summit in Tokyo, at the residence of the U.S. Embassy’s deputy chief of mission. (Photo by Alex Herz)

U.S. Sen. Dan Sullivan, R-Alaska, speaks with Nathaniel Herz after the Alaskan LNG summit in Tokyo, at the residence of the U.S. Embassy’s deputy chief of mission. (Photo by Alex Herz)

I spent 10 days in Japan last month. I was mostly on vacation — great hot springs, the trains run on time and astonishingly fast — but I also met with a few people in Japan’s energy industry. 

That’s because the nation is the world’s largest liquefied natural gas importer and, importantly, likely the biggest potential buyer of gas from the proposed Alaska LNG pipeline. The state-sponsored project, at a cost of nearly $40 billion, would run some 800 miles from Alaska’s North Slope oil fields to Cook Inlet, not far from Anchorage, then export gas mostly to Asian markets.

The LNG project has generated some headlines in recent weeks: While I was in Tokyo, U.S. Ambassador Rahm Emanuel — the former Chicago mayor and chief of staff to Barack Obama — held an “Alaska LNG Summit,” with U.S. Sen. Dan Sullivan and several state workers showing up in person to pitch the project to Japanese buyers. (I stopped by and ambushed Emanuel, to no avail, but I did spend some time with Sullivan; a little more on that later.) 

Since I was in Japan, it seemed like a good chance to try to answer the question that people always seem to ask when they hear about the pipeline project, which politicians have talked about for decades but never managed to pull off: Is it actually going to happen?

Spoiler alert: I still don’t know. But I made some observations and learned a few things on my trip that could add to Alaskans’ understanding of where the project is headed.

First: There have been a couple of major shifts in the past year that are helping boost Alaska LNG’s profile. 

The Ukraine war was the biggest one, sending global oil and gas markets into chaos and making Alaska LNG more appealing for potential customers and investors. 

A lot of where they currently get their supplies have huge risk factors. ... Putin, global pariah… Mexico, there’s a project down there, but you’ve got corruption.

– U.S. Sen. Dan Sullivan, R-Alaska, after a summit in Japan focused on an Alaska natural gas pipeline

Alaska is (relatively) politically stable, its national government is aligned with Japan, and its location is convenient for Asian customers, unlike competing suppliers’. In his presentation at the Tokyo summit, Sullivan, an Alaska Republican, stressed quick shipping times to Asia from his home state and, with PowerPoint slides featuring red-tinted portraits of Chinese, Russian and Middle Eastern autocrats, pointed to what he described as the geopolitical problems faced by Japan’s existing gas suppliers. 

Sullivan’s PowerPoint presentation from the Alaska LNG summit. (Photo by Nathaniel Herz)
Sullivan’s PowerPoint presentation from the Alaska LNG summit. (Photo by Nathaniel Herz)

“A lot of where they currently get their supplies have huge risk factors,” Sullivan told me in an interview after the summit. “Putin, global pariah…Mexico, there’s a project down there, but you’ve got corruption.”

Second: In the U.S., both state and federal elected leaders are now sinking significant political capital into Alaska LNG. This is particularly striking because the federal government faces pressure on carbon emissions targets both externally, from activists, and internally, from climate-focused members of the Biden administration. 

Sullivan and officials from the Alaska Gasline Development Corp. — the state agency pushing the project — highlighted the participation in the Tokyo summit of both Emanuel and Amos Hochstein

Hochstein is a former oil and gas executive turned key energy advisor to Biden — the Washington Post calls him the “energy whisperer” — as the president seeks to balance climate goals with the desire to stabilize global and domestic supplies. The Alaska LNG project’s boosters argue that Hochstein’s presence, and the fact that Emanuel had the leeway to organize the summit and issue a press release about it, should help soothe concerns among potential Asian customers that the Biden administration could thwart or delay the project as a way to ensure it hits climate targets or to satisfy climate activists.

It was clear to me from my own meetings in Tokyo — including with a couple of industry officials who served me hot green tea from a ceramic cup but did not want to be quoted — that Japanese buyers see the clear political appeal of investing in or buying from the Alaska project. It would both enhance economic ties with an important ally and provide a safe and stable supply of gas.

But there are also some significant obstacles that are still standing in the way.

First: These types of projects are massive investments. The state currently estimates the cost of Alaska LNG at $38.7 billion, and the project would produce 20 millions metric tons a year of gas — which equates to just over one-fourth of Japan’s annual LNG imports. (It’s likely that the project would sell gas to other countries, too, but the numbers are a good indication of its scale.) 

If there was one thing I took away from my reporting in Japan, it’s that companies there are notoriously deliberate. I got an almost knee-jerk response when I asked my sources if they thought that Japanese companies are close to signing contracts to buy Alaska gas, which boiled down to: Japanese companies are very, very, very cautious. 

These Shinkansen — Japanese bullet trains — don’t power themselves: They run on electricity. (Photo by Nathaniel Herz)
These Shinkansen — Japanese bullet trains — don’t power themselves: They run on electricity. (Photo by Nathaniel Herz)

Officials from Alaska’s pipeline corporation say that their conversations with potential customers are progressing to the point of specifics. However, my impression from my own discussions is that the events of the past year have driven Japanese buyers in the direction of more seriously vetting the Alaska project, but not yet to the edge of signing a legally binding deal.

One thing that I learned could push Japanese industry to move more quickly is if their government gets involved. But that gets to the second major obstacle to the Alaska project: Japan’s own climate goals. The country is aiming for “net zero” greenhouse gas emissions by 2050, which will likely make the government wary of endorsing or supporting large-scale, long-term fossil fuel projects like gas pipelines. (To combat that problem, Alaska LNG boosters are developing new components of the project that could potentially sequester carbon emissions and/or produce cleaner hydrogen fuel.)

And while Americans tout the geopolitical upside of an LNG alliance between Japan and Alaska, Japan still doesn’t seem to be placing too much of an emphasis on geopolitics when it comes to energy supplies: Just one week ago, officials in Tokyo announced that a Japanese consortium is sticking with its investment in a Russian oil and gas project, in spite of the war in Ukraine.

Alaska’s project faces competition, too — a major project in British Columbia that already exports to Asia, for example, is eyeing an expansion. And a new report released this week said that new planned global natural gas development, in the wake of the Ukraine invasion, is five times as much as is needed to replace Russian production.

Don’t take it from me: I’m just a dude with a liberal arts degree who talked to a few people in Japan about gas. The ultimate test of the viability of Alaska’s project will be whether Japanese and other Asian buyers sign on the dotted line, likely in the next year, before markets fully settle down in the wake of the Ukraine war. Frank Richards, the head of the state pipeline company, said as much in an interview in his Midtown Anchorage office Thursday. 

“The market is going to decide,” he said. 

Richards told me that his agency isn’t trying to drum up interest from customers so much as hammer out details with partners. And he said he thinks his agency will need less than a year to reach agreements with them.

“Their interest is there,” he said. Referring to Asian customers, Richards’ spokesman, Tim Fitzpatrick, added: “We’re not out there looking for business. We’ve kind of found our dance partners — at least some of who our dance partners will be — and we’re talking terms with them.” 

This article was originally published in Northern Journal, a newsletter from journalist Nathaniel Herz. Subscribe at this link.

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Nathaniel Herz
Nathaniel Herz

Nathaniel Herz is a freelance reporter who’s spent a decade as a journalist in Alaska, including stints at the Anchorage Daily News and Alaska Public Media. His articles published in the Alaska Beacon first appeared in his newsletter, Northern Journal, at natherz.substack.com.

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