Alaska LNG project costs could far exceed estimates, report warns

The Alaska LNG project could cost far more because its current estimate is based on limited early-stage information. GaffneyCline found that the estimate remains Class 5, the least detailed category in a five-tier industry system. Such estimates carry wide uncertainty because major engineering and development decisions are not settled.

The project depends on expensive infrastructure, including an approximately 1,300-kilometer pipeline, gas processing facilities and a liquefaction terminal. Together, these facilities account for 84 percent of the overall cost of supply. If designs, materials, construction plans or financing assumptions change, the total estimate could rise sharply.

Glenfarne Group estimates the project will cost between $44.5 billion and $54.5 billion. Applying the highest Class 5 range would produce roughly $89 billion to $109 billion. That is not a specific forecast, however. The report presents a general uncertainty range, and the estimates were based on public information rather than a complete review of current project documents.

A Class 5 cost estimate is an early estimate prepared when a project’s engineering and design are still largely undefined. It is the least detailed category under the Association for the Advancement of Cost Engineering’s five-tier classification system. The category signals that costs are not yet firmly established.

Its uncertainty is unusually broad. Class 5 estimates typically range from 20 percent to 50 percent below the initial figure on the low side, and from 30 percent to 100 percent above it on the high side. In other words, the actual cost could theoretically be twice the starting estimate.

For Alaska LNG, GaffneyCline found that the project’s estimates remained at Class 5. The consultancy reviewed publicly available information, not a complete set of the latest engineering and development documents. As the project advances, more detailed information could refine the estimate and support a higher classification before investment is approved.

The project’s developer, Glenfarne Group, has estimated total costs between $44.5 billion and $54.5 billion. Those figures are already among the largest elements of the proposed Alaska LNG development. The key issue is that the estimate remains preliminary rather than fully supported by completed engineering and financing work.

The Class 5 standard allows the high-side estimate to reach 100 percent above the initial figure. Applying that maximum uncertainty would double both ends of Glenfarne’s range. The lower estimate would become $89 billion, while the upper estimate would become $109 billion.

This calculation does not mean the project is expected to cost $89 billion to $109 billion. The report stressed that the range reflects uncertainty in an early-stage projection. It also said the review relied on public information and did not establish whether Glenfarne’s own figures use the same Class 5 classification.

The project would move natural gas from Alaska’s North Slope through an approximately 1,300-kilometer pipeline to Nikiski on the southern coast. There, gas processing facilities would prepare the gas, and a liquefaction terminal would convert it for shipment to markets such as Asia.

These components require major construction investment. The pipeline must cross a long distance, while the processing and liquefaction facilities are large industrial installations. Their scale makes them capital-intensive, so changes in their design, construction or financing can strongly affect the total project cost.

GaffneyCline reported that facilities capital costs make up 84 percent of the overall cost of supply. This concentration means the project’s financial outlook depends heavily on the cost of those three linked systems. Before a final investment decision, the report called for more advanced engineering, reliable cost estimates and a comprehensive financing framework.

Uncertain costs raise the financial risk for South Korea and other potential investors. If the project’s estimate is still preliminary, investors cannot confidently judge how much capital they would need or whether future gas sales could justify that commitment. That uncertainty matters especially because Alaska LNG faces enormous construction costs and competition from other LNG suppliers.

The report says the project needs more advanced engineering, reliable cost estimates and a complete financing framework before reaching a final investment decision. The FID is the formal commitment to proceed with construction. Until those conditions improve, investors may have difficulty assessing returns, funding needs and exposure to cost increases.

Washington has identified Alaska LNG under Seoul’s broader $350 billion US investment commitment tied to last year’s bilateral trade agreement. Yet South Korea maintains that no final investment decision has been made. Seoul says any involvement depends on commercial viability and compliance with domestic legal requirements.

The United States and South Korea describe Seoul’s position differently. US President Donald Trump has repeatedly pressed South Korea to participate in the project. He recently claimed that Seoul had already committed to Alaska LNG, presenting its involvement as settled.

The South Korean government gives a different account. It says no final investment decision has been made. South Korea also says involvement would depend on whether the project is commercially viable and whether participation complies with domestic legal requirements.

That disagreement matters because the project is included among the projects Washington has identified under Seoul’s broader $350 billion US investment commitment. The conflicting statements leave the timing and scale of South Korean participation unresolved. The project must still address uncertain costs, improve engineering and establish a comprehensive financing framework before construction receives formal approval.

Liquefied natural gas is natural gas that has been cooled until it becomes a liquid. The article describes Alaska LNG as gas that would be liquefied at Nikiski and shipped to markets such as Asia. It does not explain why liquefaction is used, so the transport explanation comes from established energy knowledge.

Liquefaction greatly reduces natural gas’s volume compared with its gaseous form. That makes it possible to load large quantities onto specialized ships and move them by sea. At the destination, the LNG can be converted back into gas for use. The article focuses on the proposed facilities rather than the technical process.

For Alaska LNG, North Slope gas would travel through an approximately 1,300-kilometer pipeline to Nikiski. Processing facilities and a liquefaction terminal would then prepare it for export. Their construction represents most of the project’s cost, with facilities capital costs making up 84 percent of supply costs.