SEOUL: A US$44bil-plus liquefied natural gas (LNG) project in Alaska that Washington is pressing South Korea to back could face sharply higher costs, a consulting report warns.
The report, submitted to Alaska lawmakers in January, came under renewed scrutiny on Wednesday as questions grow about the project’s financial viability and the risks it could pose to potential investors, including South Korea.
Energy consultancy Gaffney-Cline, in a report for the Alaska Senate Resources Committee, found that cost estimates for the Alaska LNG project remained at a preliminary stage, known as Class 5, the least detailed and most uncertain category under a five-tier industry cost-estimation standard.
Under the Association for the Advancement of Cost Engine-ering’s classification system, Class 5 estimates typically carry an accuracy range of minus 20% to minus 50% on the low side and plus 30% to plus 100% on the high side.
This means actual costs could theoretically reach as much as twice the initial estimate.
Glenfarne Group – which is the project’s lead developer – has estimated total costs at between US$44.5bil and US$54.5bil, accor-ding to a Reuters report earlier this month.
Applying the upper end of the Class 5 uncertainty range, those figures would translate into US$89bil to US$109bil.
However, the range reflects the uncertainty inherent in early- stage projection rather than a specific projection of cost overruns for the Alaska LNG project.
The estimates were also carried out based on a review of publicly available information, rather than a comprehensive examination of the project’s latest engineering and development documents, it said.
It is also not clear whether Glenfarne’s cost estimates fall under the same Class 5 classification.
Class 5 estimates are typically prepared during the earliest stages of project development, when engineering and design details remain largely undefined.
As a project progresses, cost estimates could be refined and reclassified as more detailed engineering and financial information becomes available.
The report also stressed the project’s heavy dependence on capital-intensive infrastructure, including the pipeline, gas processing facilities and liquefaction terminal. — The Korea Herald/ANN
