Frequently Asked Questions
There are many possible factors, including project development costs, competition from other LNG suppliers, Asia market prices, Asia economic growth and how fast demand for natural gas rises in Asia.
A major Alaska LNG export project would need to be sizable to achieve economies of scale. That means a big price tag to pay for an 800-mile pipeline, a multibillion-dollar plant to remove impurities from the gas, a giant liquefaction plant and expensive specialized LNG tankers. Many competing LNG projects under way or under development are located at or near tidewater and don't have the substantial pipeline costs. Controlling an Alaska project's costs so that the LNG output can be competitively priced likely will be critical.
LNG projects are active or under consideration in Australia, Africa, western Canada and the U.S. Gulf Coast, all eyeing the Asian market. In Australia alone, there are about $200 billion in LNG projects under way or under development. China, meanwhile, has shale gas that the U.S. is helping to develop, and also can import pipeline gas.
Asia LNG prices historically have been linked to oil prices. High oil prices – thus high LNG prices – are a key reason why so many potential LNG makers want to enter the market. A drop in oil prices or an unlinking of LNG prices to oil could lower LNG prices. That is a risk LNG developers must consider. In addition, demand for LNG will depend on how fast Asian economies grow, fuel switching in Asia to natural gas and the price of substitute fuels – among other factors that are very difficult to predict.