Alaska LNG's Price Promise Hinges on Unlikely Industrial Demand

The proposed Alaska LNG project aims to provide affordable gas to Alaskans through a pipeline that would distribute its high cost among industrial-scale customers. However, this claim is based on hypothetical scenarios and unworkable economics.

Boosters point to the Donlin Gold mine as a large gas consumer that would make a significant difference. But compared with the huge sales volume needed to recover costs, Donlin's demand isn't actually that great.

The deal between Glenfarne and utilities fixes prices at $16 per million British thermal units (MMBtu) until pipeline flow hits 500 million cubic feet per day. Even then, the price will be adjusted for annual inflation, which has averaged 3% over the last decade.

Currently, gas demand in Southcentral Alaska amounts to 191 million cubic feet per day. To begin lowering prices, demand would need to increase to about 2.6 times its current level. Two potential sources of additional demand are Fairbanks and an old fertilizer plant in Nikiski.