Trump Pressures for Alaska LNG Participation... Can Gas Corporation Handle the Project?

U.S. President Donald Trump publicly mentioned large-scale investments from South Korea and Japan in the Alaska LNG project, drawing attention to the actions of Korea Gas Corporation (KOGAS), the only domestic company capable of participating in this project. Since global energy companies like ExxonMobil have previously withdrawn due to economic feasibility issues, KOGAS is expected to take a cautious approach.

In a joint session of the U.S. Congress on the 4th (local time), President Trump emphasized international interest in the Alaska LNG project by stating, "Several countries, including Japan and South Korea, want to become our partners by investing trillions of dollars each." This has been interpreted as a de facto investment pressure on the South Korean government and companies using tariff barriers as leverage.

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This project involves extracting natural gas from the Prudhoe Bay gas field in northern Alaska and transporting it approximately 1,300 km via pipeline to the southern Nikiski port, where it is liquefied and exported to Asia and other regions. The total investment cost is estimated at about $44 billion (approximately 63 trillion KRW).

However, the project has a history of major energy companies withdrawing due to lack of economic feasibility. ExxonMobil, BP, and ConocoPhillips reportedly pulled out in 2016, citing huge initial investment costs and low profitability. U.S. media outlets such as The New York Times have also evaluated that President Trump's 'tariff threats' revived interest in the stalled Alaska gas project.

If South Korea decides to join the Alaska LNG project, KOGAS is practically the only Korean company that can participate. Although private domestic energy companies like POSCO International, SK E&S, and GS Energy are involved in LNG businesses, KOGAS is the only entity with the capacity and legal authority to undertake overseas LNG projects of this scale. Private companies focus on LNG trading and power generation, making it difficult for them to play a leading role in large-scale overseas resource development projects that require intergovernmental cooperation. In other words, the Alaska LNG project participation demanded by the Trump administration is essentially pointing to KOGAS.

However, KOGAS's financial situation makes it hesitant to engage in such large-scale overseas investments. Last year, KOGAS achieved a turnaround with sales of 38.3887 trillion KRW and operating profit of 3.0034 trillion KRW, but its debt ratio remains high at 433%, indicating ongoing financial instability. In particular, unpaid residential city gas bills have accumulated to about 14 trillion KRW, and total debt stands at approximately 47 trillion KRW.

Given the LNG business's nature, which requires large upfront investments and long periods to recover investment costs, it is inevitably burdensome for KOGAS to act as a direct investor.

Concerns also arise regarding the Ministry of Economy and Finance's '2024?2028 Mid-to-Long-Term Financial Management Plan for Public Institutions.' The ministry aims to reduce KOGAS's debt ratio to 215.7% by 2028. Direct investments requiring massive capital input, such as the Alaska LNG project, could negatively impact KOGAS's financial soundness.

Considering these circumstances, indirect participation by KOGAS appears more likely. The most probable method is through an LNG offtake agreement. In this case, KOGAS would participate by purchasing the produced LNG under a long-term contract rather than investing directly in the Alaska LNG development. This compromise could accommodate U.S. demands in terms of energy cooperation without large capital investment.

There is also a possibility of forming a consortium with private energy companies such as POSCO International, SK E&S, and GS Energy to participate through partial equity investment.

A KOGAS official stated, "For large-scale projects like this, we evaluate feasibility through internal condition analysis and decide on equity participation or technology provision. In export projects with the U.S., there are various options beyond equity participation or investment, such as product purchases, and we are closely monitoring investment situations in each country."