Qilak LNG To Invest USD 5B For LNG Facility in Alaska For Asian Customers

Qilak LNG plans to invest $5 billion in a proposed LNG facility on Alaska's North Slope to compete with Russia's Yamal project for Asian customers by the end of this decade, according to its CEO.

Major LNG importers such as Japan, South Korea, and Taiwan are reconsidering Russian supplies following sanctions imposed on Moscow following its invasion of Ukraine, and more natural gas may be required to produce lower emission and alternative fuels as nations seek to reduce carbon emissions.

Qilak is 2,000 nautical miles (3,700 km) closer to Asian markets than its main competitor in the Russian Arctic, the Novatek-led Yamal LNG. According to Mead Treadwell, Qilak's CEO and chairman, the Alaskan project aims to ship an LNG cargo to Asia in 14 days, which is roughly twice as fast as shipments from the United States' Gulf Coast.

"This project has the potential to create an entirely new province of supply for LNG, ammonia, and hydrogen... There are geopolitical benefits, and diversifying Arctic gas supplies away from Russia is generally regarded favourably "Treadwell explained.

The company expects to produce LNG at a lower cost than Yamal LNG.

According to company data, Yamal LNG, which shipped its first cargo in 2017, spent $27 billion to liquefy 16.5 million tonnes of LNG per year. According to calculations, this equates to about $1.6 billion per million tonnes.

According to Reuters calculations, Qilak's annual output is expected to be 4 million tonnes at a cost of $5 billion, or $1.3 billion per tonne.

According to Treadwell, a former Alaska governor, Qilak LNG is working with Lazard as an investment bank to attract financing and also plans to offer an ownership stake to Alaska entities, including indigenous investment groups.

"We are speaking to potential investors both inside and outside of Japan, as well as firms that can help us reduce the project's carbon footprint," he said, without elaborating.

Treadwell said the project, which accounts for 1% of global LNG demand, should be launched by 2030, when potential buyers anticipate a shortage, a delay from 2027 due to the COVID-19 pandemic.

"We are focusing on the northeast Asian market, but countries outside of the region are considering involvement to increase their LNG purchases," he said, adding that Japan's current and future LNG receiving terminals could also be used for transhipment.

Qilak LNG has yet to select engineering, procurement, and construction firms, as well as shipping companies, but Treadwell expects Nana Worley and Aker Arctic Technology to lead the feasibility study.

"If we stay on track, the feasibility study will be completed this year, with front-end engineering design in 2024," he said, adding that a final investment decision could be made in 2025, depending on a number of factors.

According to the project's owner, Dubai-based Lloyds Energy, the project will use gravity-base structures – special weighted legs that support offshore platforms – off the Arctic coast of Alaska to deliver three to five tankers per month to Asia.

It intends to use Arc7 LNG tankers capable of sealing in Arctic waters, similar to those used by Yamal, according to Treadwell.