LNG Project Becomes the "Core Issue" of Korea-US Tariff Negotiations, Reasons for Trump's Push

Recently, the US has been increasing pressure on the "Alaska LNG (liquefied natural gas) project." The beginning was on March 4th when U.S. President Donald Trump mentioned in his congressional speech that "South Korea, Japan and others have decided to participate in the development of the Alaska LNG project and invest billions of dollars," issuing a challenging invitation. In February, Alaska Governor Mike Dunleavy went to Washington D.C. to meet with South Korean Ambassador to the United States Cho Hyun-dong; at the end of March, he visited South Korea, meeting with Acting President Han Duck-soo, Prime Minister Han Duck-soo, and Minister of Trade, Industry and Energy Moon Deok-kon.

On the 8th, after Trump spoke with Acting President Han Duck-soo on social media Truth Social, he posted: "Had an excellent phone call with Acting President Han Duck-soo," mentioning trade imbalances, tariffs, shipbuilding, defense cost sharing, purchasing American-made LNG, and cooperation investment in the Alaska pipeline project. Among these issues, the reason why Alaska LNG has become the main issue in tariff negotiations can be summarized into three points based on expert analysis.

Profitable and Revitalizing Alaska

The Alaska LNG project involves transporting natural gas extracted from the northern Alaska fields via a 1,300-kilometer-long pipeline to Nikiski in the south, then exporting it to countries including South Korea, Japan, and Taiwan in Asia. The project is massive, with total investments reaching $44 billion (approximately 62 trillion Korean won), planning to begin official exports in 2031. The annual expected production of the project, as announced by the Alaska Gasline Development Corporation (AGDC), is 20 million tons. Even if calculated at around $10 per MMBtu (thermal unit), the annual sales would reach $10 billion. According to AGDC's claim of a production cost of $6.5 per MMBtu, profits could be realized approximately 13 years later. Despite concerns over additional investments and project delays, if executed according to plan, it remains a profitable deal.

Since the 1970s, the sharp reduction in oil production that sustains Alaska has plunged the local economy into difficulties. This project holds significant appeal for revitalizing the regional economy. Particularly, the Cook Inlet gas field, which supplies natural gas to densely populated southern areas like Anchorage, is nearing depletion. This move ensures a new source of natural gas supply.

Core of Arctic Circle Strategy

It is observed that the Alaska LNG project is closely related to President Trump's Arctic Circle hegemony strategy. To Trump, who intends to annex Greenland, a Danish territory, and propose Canada's incorporation into the US as the 51st state, developing Alaska LNG is equally important as the former two. Alaska's area is equivalent to a quarter of the contiguous United States (48 states) and more than 17 times the size of South Korea's land area (100,000 square kilometers).

Professor Jung Yong-hyun (translated name) from Asia University stated: "Alaska has been a strategic stronghold with large-scale military facilities since the Cold War era," "Even for future increasingly important Arctic Circle development, it is necessary to invest through LNG as a medium." On the 9th, the White House issued an executive order titled "Restoring American Ocean Leadership," which also stated that it will develop strategies to ensure the security of Arctic routes and American leadership.

Sustaining Energy Hegemony Strategy

Finally, the LNG project is one of the pivots of President Trump's "energy hegemony" strategy. Recently, the US exports about 80 to 90 million tons of LNG annually, while the Alaska project's annual production of 20 million tons of LNG is more than 20% of the former. The Trump administration aims to utilize its position as the world's largest producer of oil and gas to expand energy exports, thereby gaining "energy hegemony." While increasing exports of shale gas to Europe, the Alaska-produced LNG can counterbalance Russian-produced LNG in East Asian regions such as South Korea, Japan, and Taiwan. Professor Shin Hyun-dun from Inha University stated: "In the total natural gas reserves of the United States, Alaska accounts for 18%, but the production ratio is less than 10%," "亟待开发" (亟待开发 needs translation).

However, for South Korea, risks exist such as tens of trillions of won in investment, uncertainty in construction schedules, etc. It is common for the total investment in natural gas pipeline projects to exceed initial expectations, and delays in project timelines are frequent. Delaying by several years after signing long-term purchase contracts not only results in financial losses but may also impact the supply of LNG used as urban gas and power generation fuel. A South Korean government official said: "The current stage lacks sufficient information," "There are many elements to confirm before making investment or purchase decisions."

Source: Chosun Ilbo

Original article: https://www.toutiao.com/article/7494631170655764992/

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