Lee Gyu-lee is a business writer at The Korea Times, focusing primarily on IT & telecommunications, the Ministry of Trade, Industry and Energy and KOTRA. Prior to this, she has covered a wide range of cultural news, from film, television and K-pop to lifestyle and fashion.
POSCO tempers Alaska LNG deal hype after Glenfarne announcement
Participants visit POSCO Group’s booth at the World Climate Industry Expo in Busan, Aug. 27. Courtesy of POSCO Holdings
By Lee Gyu-lee
POSCO International has signed a partnership with Glenfarne Alaska LNG, the lead developer of the Alaska liquefied natural gas (LNG) project. Despite heightened expectations that it could become the first Korean company to join the $44 billion energy project, the trading firm is stressing that a final decision on its participation has yet to be made, in contrast to Glenfarne’s conclusive tone.
Glenfarne announced on Thursday that it had inked a strategic partnership on the project’s development with the POSCO unit during Gastech, an energy conference in Milan, Italy, Wednesday (local time).
Glenfarne said the agreement includes initial terms for POSCO to supply steel to construct the project’s massive 1,300-kilometer-long, 107-centimeter-wide pipeline, which will connect the state’s North Slope to southern Alaska for export.
The terms also contain conditions for a 20-year heads of agreement (HOA) that POSCO will purchase 1 million tons of LNG offtake per year on a free on board (FOB) basis, the project’s first. Offtake refers to a long-term supply purchase agreement.
The deal will be finalized after Glenfarne and POSCO negotiate and sign definitive agreements with final approval from both companies’ boards.
“POSCO’s participation in Alaska LNG adds tremendous momentum as we drive this signature North American LNG project forward at a rapid tempo,” Glenfarne CEO and Founder Brendan Duval said in a press release.
“This agreement includes critical project components and demonstrates global support for unlocking some of the most strategically located LNG in the world. Korea is a valued target market for Alaska LNG, and we greatly appreciate POSCO’s engagement as we advance Alaska LNG.”
A file photo from 2019 shows an exploratory drilling camp at the proposed site of the Willow oil project on Alaska's North Slope. AP-Yonhap
Compared to Glenfarne’s conclusive stance, POSCO International responded with a more cautious tone, clarifying that the recently signed partnership is “a nonbinding” one.
“The pre-agreement we signed this time is a nonbinding letter of intent which does not obligate either party,” POSCO International said. It added that further feasibility and profitability reviews are required for each area of cooperation, including steel supply and LNG offtake.
“If feasibility and profitability are confirmed, a final decision on participation in the project will be made through the company’s internal decision-making process, such as the board of directors meeting.”
The company noted that the details of the agreement cannot be disclosed due to mutual nondisclosure obligations, despite the terms outlined by Glenfarne.
Glenfarne’s announcement on the partnership with POSCO comes shortly after it signed a letter of intent with JERA, the major Japanese LNG buyer, under the same terms as POSCO — 1 million tons of LNG sales a year over a 20-year term on a FOB basis.
Since becoming the project’s lead developer in March, Glenfarne has been forging preliminary agreements with companies around the world that could lead to LNG offtake from the project’s planned capacity of 20 million metric tons per year.
Taiwan state-owned energy company CPC and Thailand state-owned energy company PTT have also signed preliminary partnerships with Glenfarne to purchase 6 million tons and 2 million tons a year, respectively, but no binding contracts have been finalized yet.
Glenfarne is reportedly aiming to reach a final investment decision on the pipeline by the end of the year.