Alaska LNG offers shorter transport times to Japan. Created based on data from The Institute of Energy Economics, Japan.
このページを 日本語 で読む
As negotiations between Japan and the United States over President Donald Trump's tariffs intensify, a US liquefied natural gas (LNG) project is viewed as Tokyo's trump card.
The project involves a 1,300-kilometer pipeline running from the North Slope gas field in northern Alaska down through the state to a newly constructed liquefaction plant. Once completed, it could supply 20 million tons of LNG annually to Japan and other East Asian countries.
The concept itself has existed for a long time, but the primary obstacle has been the enormous cost. Estimated at $44 billion USD (over ¥6 trillion JPY), the project is more than twice as expensive as another LNG project currently underway in Texas. With rising material prices, the cost is expected to increase even further as the project undergoes additional review.
If the project's costs are passed on to LNG prices, it could lead to "high prices" for the consumers. Scheduled to begin operations in 2030, after Trump's tenure, the project faces uncertainties.
Takafumi Yanagisawa, senior researcher at The Institute of Energy Economics, Japan, points out that "the risk of policy changes following a change in administration must be carefully considered."
Merits for Japan
There are clear advantages for Japan. Currently, most US-produced LNG is shipped from Gulf Coast terminals, taking roughly 30 days via the Panama Canal and about 40 days via the Cape of Good Hope. In contrast, LNG shipped from Alaska can reach Japan in under 10 days.
US-produced LNG, including but not limited to that from Alaska, has another advantage: it does not contain a "destination clause" restricting resale to third parties.
Japan's LNG procurement is based on long-term contracts that ensure a stable supply of a fixed volume over an extended period. But even if demand falls, such as during a warm winter, the contracted amount must still be purchased.
Since US LNG contracts lack a destination clause, any surplus can be resold to other countries, helping Japan mitigate the risk of excess supply.
Private companies are already expanding their procurement of US LNG. JERA, Japan's largest thermal power producer, has signed contracts with four American companies to purchase up to 5.5 million tons of LNG annually.
While diversifying supply sources is the primary goal, another important factor is that "the contracts offer greater flexibility" compared to LNG imports from the Middle East, says Mineko Hida, general manager of JERA's LNG Division.
Leverage Over Tariffs
JERA has also expressed interest in the Alaska LNG project. At a press conference in late June, Chairman Yukio Kani praised the concept as "very good." He emphasized the short transport time to Japan and the absence of geopolitical risks along the route, such as those linked to the Strait of Hormuz in the Middle East. JERA is reportedly closely monitoring the ongoing review of the project plan.
US LNG currently accounts for about 10% of Japan's total LNG imports. With global demand for LNG expected to continue rising, increasing imports from the US will also help strengthen the country's energy security.
In the Japan-US tariff negotiations, differences persist over issues such as automobile tariffs. President Trump has repeatedly labeled trade with Japan in automobiles as "unfair."
However, increasing imports of American cars, which are unpopular among Japanese consumers, or reducing Japan's automobile exports, is unrealistic. If Japan concedes too easily, it risks encouraging repeated unreasonable demands. The Japanese government should therefore approach the negotiations with firmness and persistence.
Trump's Pet Project
On the other hand, if Washington remains focused on correcting the trade imbalance, no argument about the contributions of Japanese companies to the American economy is likely to sway President Trump.
The only way to break the deadlock is by expanding imports of US products that also benefit Japan. While the Alaska LNG project won't immediately reduce the US trade deficit, advancing this initiative with Japan's involvement — one of Trump's pet projects — could have a positive impact.
In early June, the Ministry of Economy, Trade and Industry sent Takehiko Matsuo, the Vice Minister for International Affairs, to a US government briefing on the Alaska LNG project.
While it's clear the government is considering the project as a bargaining chip, another senior Ministry official expressed caution, stating, "LNG prices are directly linked to electricity and gas rates. If the price is high, we simply won't buy it. It all depends on economic viability."
A Strategic Bet
So how should Japan engage with the risky Alaska LNG project?
Yanagisawa stresses that if Japan decides to participate, "government involvement is essential." He suggests that development support through the Japan Oil, Gas and Metals National Corporation (JOGMEC) could be considered to help keep LNG prices affordable.
Should it prove difficult for Japan to take on the project alone, another option would be to share the investment burden with other Asian LNG-importing countries and regions, such as South Korea and Taiwan. "If it's economically viable, then we should do it," the senior METI official said, without ruling out the possibility.
Can we leverage the few cards we hold as negotiation tools to break the deadlock? Now is the time to apply wisdom and safeguard Japan's national interests.
RELATED:
- Japan to Import Canadian LNG in Bid to Diversify Energy Supply
- 'Eggs of Possibilities': Expo 2025 Pavilion Offers Interactive Exploration of Energy
Author: Shunichi Takahashi, The Sankei Shimbun
(Read this in Japanese)
このページを 日本語 で読む
