Trump's "Korea Should Also Participate" Alaska Gas Pipeline, Reasons for Attention [AK Radio]

Gas-Related Stocks Surge Across the Board
If Successful, Energy Security for South Korea and Japan Will Rise
Construction Costs and Profitability Remain Key Issues

U.S. President Donald Trump, in his first joint address to Congress since beginning his second term, drew attention by mentioning that South Korea and Japan would invest trillions of dollars in the Alaska gas pipeline project. Following this statement, related stocks in the domestic market have shown a collective upward trend.

In fact, the Alaska natural gas development project has long been pursued by the U.S. government. Since the discovery of a natural gas field in the Prudhoe Bay area, the northernmost part of Alaska, in 1968, oil fields have also been found in the region. While crude oil could be exported through pipelines connecting Alaska, Canada, and the U.S., natural gas faced development difficulties due to the lack of a large-scale transportation method.

To export natural gas, it is necessary to build a liquefied natural gas (LNG) production complex and connect a gas pipeline to the ice-free port of Nikiski at the southernmost tip of Alaska. This is a long stretch of about 1,200 km crossing Alaska, and construction is known to be very challenging due to the harsh Arctic climate conditions.

The U.S. government and several oil and gas companies have formed consortia multiple times to push forward the construction project but have repeatedly failed. The main obstacle has been the enormous initial construction cost, estimated at $44 billion (approximately 64 trillion KRW). President Trump mentioned that South Korea and Japan would bear most of this massive investment.

The view of Alaska glaciers. Photo by AP and Yonhap News Agency

Last month, during Japanese Prime Minister Shigeru Ishiba's visit to the U.S., President Trump specifically mentioned this project, and Prime Minister Ishiba reportedly expressed willingness to consider investing. Additionally, Lee Eon-ju, a senior member of South Korea's Democratic Party, recently visited the U.S. and reportedly held meetings with American and Japanese officials related to the Alaska gas pipeline.

If this project succeeds, South Korea and Japan can expect medium- to long-term benefits. Currently, East Asian countries including South Korea and Japan import over 90% of their natural gas from Middle Eastern countries such as Qatar and Oman. The volume imported from the U.S. is relatively small due to the complexity of transportation.

Currently, most U.S. natural gas is gathered in the southern Houston area before being exported overseas. When exported to Asia, it passes through the Panama Canal and crosses the Pacific Ocean to reach South Korea or Japan. Not only is the distance long, but recent droughts in the Panama Canal have reduced water levels, causing logistical delays. Sometimes, LNG carriers from the Middle East arrive earlier than those from the U.S.

Direct imports via Alaska would significantly shorten transportation time. Currently, LNG carriers departing from the southern U.S. take about 30 days to reach Tokyo, whereas shipments from Alaska would arrive in just 7 days. This could lead to reduced transportation costs. There are also security advantages, as it would reduce energy supply burdens amid Middle Eastern political instability or military tensions in the China-Taiwan Strait. Direct gas supply from North America would strengthen energy security.

However, the biggest issue with this project is profitability. With initial costs estimated at 64 trillion KRW, some forecasts suggest the total construction cost could be 4 to 5 times higher. Even if construction proceeds quickly, the first gas supply is expected only around 2031-2032. The unpredictability of natural gas prices during this period adds to the uncertainty. If the war in Ukraine ends and Russian natural gas returns to the market, prices could plummet, reducing the project's viability.

Reuters·Yonhap News

Nevertheless, the positive response from the South Korean and Japanese governments is influenced by diplomatic considerations. Analysts view this as a strategic choice to avoid the tariff war pushed by the Trump administration. It will take years for the project to materialize, and the Trump administration's term may expire in the meantime. Compared to potential damages from the tariff war, the initial investment cost may be relatively smaller.

In South Korea, alongside the shipbuilding industry, the Alaska gas pipeline project is cited as a key card to counter the tariff war. It is known that Japan and South Korea are reviewing the project as a consortium, but actual participation remains to be seen.

If this project succeeds, it is expected to have a significant impact on international relations. If South Korea and Japan can reduce the burden of the tariff war with the U.S. through this, it could serve as a model case for other countries facing tariff conflicts with the Trump administration.

Looking at countries like Canada and Mexico, which were initially subjected to tariffs, or Ukraine, which faces diplomatic difficulties, the Trump administration has shown a pattern of launching attacks without clearly stating demands and only mentioning requirements afterward. In contrast, with the Alaska gas pipeline, the Trump administration first clearly stated its intentions, and the South Korean and Japanese governments responded positively, which is seen as a new diplomatic model.

However, if this transactional approach becomes established, there is a risk of weakening trust between countries and a return to diplomacy based on power dynamics. Concerns have also been raised about the advent of a "neo-imperialism" similar to the imperialist era of the past. It remains to be seen how President Trump's current diplomatic line will affect the international order and the U.S. both domestically and abroad.

Given that the U.S. president directly mentioned investments from South Korea and Japan, the likelihood of the two countries forming a consortium and declaring participation in the project appears high. However, since private companies' involvement is essential, the specific progress should be monitored further.