Trump's Iran war may damage, not improve prospects for Alaska pipeline

The wishful thinking in Alaska since Trump started his war with Iran is that the fiasco in the Strait of Hormuz will improve the odds of getting the Alaska LNG project built.

It was Gov. Mike Dunleavy who praised Trump’s war as a “strategic master stroke” and claimed it makes getting gas from Alaska look more attractive to countries in Asia.

“The mere threat of disruption affects global markets, insurance costs and long-term contract stability,” said Dunleavy. “That’s where Alaska comes in. When complete, a major planned Alaskan LNG pipeline will enable exports of about 3.5 billion cubic feet of gas a day by 2030, ensuring energy security for Japan, South Korea, Taiwan and the entire region.”

But there is an argument to be made that the closure of the Strait of Hormuz will reduce the chances of an Alaska pipeline. The Washington Post reported this week on the chance that the crisis will lead to other solutions.

“The research firm Wood MacKenzie wrote in a report this week that if the disruption persists, it “could accelerate a structural shift in global energy systems,” leading countries to cut their consumption of imported oil and gas to half of current levels by 2050 — a steep drop compared with the firm’s prewar “baseline” forecast. The report notes that such a shift would do little to slow climate change, as it includes an expansion of planet-warming coal generation.”

“In South Korea, which is one of the world’s largest importers of LNG, President Lee Jae Myung late last month launched a campaign to speed up the country’s shift away from imported fossil fuels and toward more renewables, which includes aggressive targets for clean power projects.”

S&P Global came away from a major international energy conference in Texas with news that doesn’t bode well for the Alaska project, though it didn’t even mention Alaska in its overview of the world LNG situation.

Asia has been cutting its LNG demands and switching to other fuels, including coal.

“This latest shock to the global LNG supply could permanently change global consumption to other energy sources to avoid future shocks. In particular, should regional public policies shift away from natural gas and toward coal or renewables, Asia LNG demand growth may not resurge even under sequentially lower natural gas prices. Such a scenario might require LNG supply curtailment and temporarily shut the U.S. LNG export arbitrage.”