By John Geddie, Tim Kelly and David Brunnstrom
TOKYO/WASHINGTON (Reuters) – When President Donald Trump sat down to lunch with his Japanese counterpart this month, talk turned quickly to how Tokyo could help realise a decades-old proposal to unlock gas in Alaska and ship it to U.S. allies in Asia.
Trump and his energy tsar Doug Burgum framed the venture as a way for Japan to replace Middle East energy shipments and address its trade imbalance with the U.S., according to two officials briefed on the closed-door talks.
Japanese premier Shigeru Ishiba – eager to ensure a positive first meeting and stave off damaging U.S. tariffs – struck an optimistic note about the Alaska LNG project despite Tokyo’s doubts about its viability.
Ishiba told Trump and Burgum that he hoped Japan could participate in the $44 billion project, said the officials, granted anonymity due to the sensitivity of the talks.
Trump repeatedly mentioned the project in his public remarks after the lunch. Ishiba did not, and there was no reference to it in the official readout of the talks.
Reuters interviews with more than a dozen people, including current and former U.S. and Asian officials, show how the Trump administration is moving to recast economic relations with East Asia by binding regional allies to Washington through increased investment in American fossil fuels, particularly LNG.
The U.S. sales pitch seeks to tap into concerns in Asian capitals about tariffs and the security of sea lanes that carry their energy imports, Reuters found. Details of the behind-the-scenes exchanges and specifics of the U.S. approach have not been previously reported.
While the Alaska LNG proposal faces cost and logistical hurdles, Japan, South Korea, Taiwan and others are buying into the idea of increasing U.S. gas imports more broadly, which could bolster the U.S. economy and blunt the influence of China and Russia.
Japan’s participation in Trump’s emerging strategy would be critical: It is the world’s No.2 LNG buyer, a major investor in energy infrastructure, and a trading hub with a glut of LNG that could help open new markets for U.S. gas in Southeast Asia.
“If the Trump administration were to have its way, U.S. LNG would flow in massive quantities to Japan and South Korea and then would flow downstream…so that Southeast Asia would become economically dependent on the United States,” said Kenneth Weinstein, Japan chair at Hudson Institute, a conservative think tank. “It’s redrawing the map of energy dependence.”
In a joint statement with U.S. Secretary of State Marco Rubio on Saturday, Japanese and South Korean foreign ministers agreed to strengthen energy security by “unleashing” America’s “affordable and reliable energy”, particularly LNG. They did not mention Alaska.
White House National Security Spokesman Brian Hughes told Reuters the U.S. “produces some of the cleanest LNG in the world and we believe the Japanese can play an even bigger role in purchasing America’s abundant oil and gas”.
Japan’s foreign ministry declined to comment on the accounts of the Ishiba-Trump meeting. Japan’s trade minister plans to visit Washington next month to seek exemptions from Trump’s tariffs and discuss Japan’s plans to buy more U.S. LNG, Japanese media reported on Thursday.
SALES PITCH
The idea of building an 800-mile pipeline linking gas fields on Alaska’s North Slope to an export terminal on its Pacific coast has long stuttered due to the high costs and harsh terrain.
But expecting Trump might raise a project he has personally championed in the February 7 meeting with Ishiba, Japan was preparing to voice tentative support to win his favour and forestall trade friction, Reuters reported last month.
They did not anticipate it would feature so highly on Trump’s agenda.
Over lunch with Trump and Burgum, the U.S. asked Japan to consider infrastructure investments in Alaska LNG as well as long-term purchase agreements, according to the officials briefed on the talks.
The U.S. side stressed the project’s proximity to Japan compared to the Middle East and the fact that shipments would avoid sensitive choke points such as the Straits of Hormuz and Malacca, and the South China Sea, the officials said.
Additional purchases of U.S. LNG could also help Asian allies reduce reliance on Russian gas, said Dan Sullivan, a U.S. senator for Alaska.
Alaska LNG “was a big part of the discussion” with Ishiba, Sullivan, who was briefed on the talks, told Reuters.
At one point in the meeting, the U.S. officials used maps to emphasise the strategic benefits of the Alaska project, said Sullivan and another official.
“Having a president who’s forceful and tenacious, spending this much time on this project, I’m sure made an impression on the Japanese,” Sullivan said.
Project developers are trying to court investment from firms such as Inpex, a Tokyo-listed oil and gas exploration company whose largest stakeholder is the Japanese government, according to two other sources.
A spokesperson for Inpex, which has not been previously linked to the Alaska plan, said it would not comment on “discussions or dealings with specific stakeholders”.
Japan obtains around one-tenth of its LNG from the U.S., and similar proportions from Russia and the Middle East, according to Japan’s finance ministry. Australia accounts for about 40%.
Hiroshi Hashimoto, senior analyst at the Institute of Energy Economics, Japan, said LNG imports from the U.S. could reach 20% of Japan’s total over the next five to 10 years as existing contracts, including with Russia, roll off.
U.S. LNG is largely shipped to Japan from the Gulf of Mexico, which Trump recently renamed to the Gulf of America, via the Panama Canal or the long way around past Africa and through the Indian Ocean.
There are no LNG export terminals on the U.S. west coast – a more direct route to Asia – although Sempra’s Costa Azul project in Mexico, fed by U.S. gas, is expected to start commercial operations next year.
Of the 119.8 billion cubic metres of LNG the U.S. shipped last year, more than a third went to Asia, according to LSEG data.
ENERGY SECURITY BONDS
Beyond Japan, Trump’s energy security argument seems to be landing elsewhere in Asia, especially with trade tariffs looming.
Indian Prime Minister Narendra Modi made a similar gas pledge in a meeting with Trump this month.
Taiwan, the democratically ruled island claimed by China, is also considering more U.S. energy purchases, including LNG from Alaska.
Increasing Taiwan’s dependence on U.S. energy could help deter China from taking aggressive steps such as naval blockades, said Landon Derentz, who was a senior U.S. energy official during Trump’s first term.
With U.S. supplies, “in some ways you’re contracting for a security guarantee that the United States is going to be an advocate in the event of a conflict in making sure that supply arrives”, he said.
South Korea, too, is weighing investing in Alaskan LNG and other U.S. energy projects, two South Korean officials told Reuters. Seoul hoped for concessions from Trump in return, one said.
A spokesperson for South Korea’s industry ministry said Seoul was exploring ways to strengthen energy security with the U.S.
Bill Hagerty, a U.S. senator for Tennessee who served as ambassador to Tokyo in the first Trump administration, told Reuters he would like Japan, which already trades its surplus gas, to become the key distribution hub for U.S.-origin LNG.
“Whether it’s from Alaska, Louisiana or Texas, America can work very closely with Japan to create the type of energy security bonds that will be great for our nations’ economies and for our national security,” he said.
(Reporting by John Geddie, Tim Kelly, Yukiko Toyoda and Yuka Obayashi in Tokyo; David Brunnstrom and Trevor Hunnicutt in Washington; Hyunjoo Jin in Seoul and Ben Blanchard in Taipei; Editing by David Crawshaw)
Comments