Inside the Korea-U.S. $200 billion investment package tug-of-war

With Korea having postponed the announcement of its investment package for the United States, the two sides still appear to be struggling to bridge sticking points over a gas-fired power plant in Texas and an equity stake in nuclear reactor manufacturer Westinghouse — even as Seoul has agreed in principle to keep an Alaska liquefied natural gas project (LNG) on the table as a potential, but as yet uncommitted, addition to the package.

Korea's Ministry of Trade, Industry and Resources on Wednesday requested to postpone a National Assembly briefing on the $200 billion investment plan for the United States, citing the need for further coordination, which will inevitably delay the signing of the two countries' bilateral memorandum of understanding previously expected on Friday. 

A report to the National Assembly is expected on Tuesday, with an announcement to follow on Sept. 23, though the exact dates have yet to be confirmed.

The delay is hardly a surprise, given that each of the package's three candidate projects carries its own disputes between Seoul and Washington.

The talks are part of Korea's pledge to invest $350 billion in the United States made last November — $150 billion earmarked for joint shipbuilding projects and $200 billion for direct strategic investment. Seoul and Washington have spent roughly ten months negotiating how that $200 billion will be deployed, a timeline that would allow U.S. President Donald Trump to unveil the deal ahead of the U.S. midterm elections.

Texas gas project: Haggling over cost

A gas-fired power project in Encinal, Texas — the first project agreed upon in the investment package — has been contentious as Washington has pushed for a 25 percent increase in investment from the initial $20 billion budget, according to local media outlets.

The project’s budget, originally set at $19.8 billion, has since inched into the $22 billion to $22.3 billion range, reports suggest. But a final tug-of-war continues over the actual scale of Korea's investment, its equity stake and the profit-sharing structure.

Industry Minister Kim Jung-kwan dismissed speculations over rising costs, however, insisting that the agreed ceilings — $200 billion in total investment, capped at $20 billion annually — would hold firm.

The Encinal project carries 6.3 gigawatts of capacity in La Salle County in southern Texas, which will begin with a 1.3-gigawatt simple-cycle unit, followed by five 1-gigawatt combined-cycle units, according to Hana Securities. Demand in the area has surged as Texas has become a hub for advanced semiconductor fabrication and AI data centers.

Seoul is working to structure the deal as a Korean consortium, with Samsung C&T expected to handle engineering, procurement and construction and Doosan Enerbility supplying gas turbines.

Local media also reported the U.S. government has rejected Korea’s request for contractual guarantees that Washington would help arrange power purchase agreements and ensure Korean firms are selected as equipment and service vendors in the Encinal project. 

That follows an MOU signed last November whose Article 10 calls on the United States to "endeavor" to arrange offtake agreements where possible, and whose Article 11 states that Washington "shall" select Korean vendors over comparable foreign suppliers when feasible — a commitment Minister Kim said is subject to a "good-faith review of Korean recommendations."

Both commitments, however, were laid out only in soft, non-binding language — leaving room for exactly the kind of disagreement now on display.

Westinghouse stake: A seat vs. just equity

Talks of Korea taking an equity stake in U.S. nuclear technology company Westinghouse have also stirred a debate, with the two sides now wrangling over size.

The U.S. government proposed a minority stake of 5 percent to 10 percent, while Seoul is pushing for 15 percent to 20 percent along with a seat on the board, local reports said, which would eventually let Korea weigh in on Westinghouse's major decisions, including its overseas contracts. 

Seoul's push stems from its effort to strengthen its hand in recurring intellectual-property disputes — Westinghouse has long collected royalties on Korean reactor exports on the grounds that its technology underpins Korean designs — as well as from restrictions Washington has placed on Seoul's own reactor exports to North American and European markets.

"Korea is pushing hard for around a 15 percent equity share, but such a figure is not likely to happen because Washington won’t let it hand over a voting stake,” a political source said on the condition of anonymity due to the sensitivity of the matter. 

The two countries reached a consensus to build eight reactors across the United States, and of them, two are expected to use Korea's APR1400 design, with the remaining six built on Westinghouse's AP1000 platform. 

“The larger concern here is that Korea risks being locked into the role of subcontractor rather than lead contractor,” said Cho Hong-chong, an economics professor at Dankook University and chairman of the Korean Resource Economics Association. 

“In the United Arab Emirates' Barakah project, Korea served as the main contractor, but in Saudi Arabia, that role has gone to Westinghouse, with Korean firms working beneath it,” Prof. Cho said. “If that hierarchy becomes the template, it could narrow the path for Korea's own reactor brands to compete abroad.”

Washington, lacking the domestic capacity to build reactors on its own, has already come to rely heavily on Korean firms for much of the construction and equipment supply.

The United States has built almost no large reactors since the late 1970s, and its skilled labor pool, equipment supply chains and large-scale project-management capacity have atrophied as a result.

The latest Vogtle 3 and 4 reactors in Georgia, the first large reactors to break ground in the United States in 34 years, suffered seven years of delays and came in nearly two-and-a-half times over budget. 

Alaska LNG project: Viability in doubt

The Alaska LNG project, which has been weighing heavily on Seoul, faces deeper skepticism surrounding its business viability. 

The Korean government has been pushing not to rule out the project but to hold off on a final commitment until the confirmation of the project’s commercial viability. 

The $44 billion project proposed a pipeline to carry natural gas roughly 1,300 kilometers (800 miles) from the Prudhoe Bay field in Alaska's far north to an ice-free southern port for export, which would require more than a decade of construction. 

High building and shipping costs, elevated U.S. labor and materials prices, and environmental regulations have all raised questions about the project's returns. 

But renewed interest appears tied to the war in the Middle East, which has intensified disruptions to global oil and gas supply and pushed Seoul to consider diversifying away from Middle Eastern energy sources.

Minister Kim once called the project 'high-risk' and said Korea would not participate unless its feasibility and commercial viability are confirmed.

Alaska offers a geographic advantage: shipping to Korea and Japan takes only about a week, compared to three weeks from Houston — or up to seven weeks if tankers must route around the Cape of Good Hope. The project's backers say they have already secured buyers for 60 percent of a planned 20 million tons of annual LNG exports to the Asia-Pacific region.

But the project's fate has already proven vulnerable to changes in Washington, which first advanced under Trump's first term but was shelved under the Biden administration amid climate concerns. 

The Korea Gas Corporation may be the only party that can lead Korean involvement in this massive project, but the company is in weak financial shape, with debt that swelled to roughly 47 trillion won ($34 billion). 

Trump's pressure on Seoul shows no sign of letting up, with the president himself raising the project unprompted on Sept. 2, telling reporters that Korea and Japan “are going to Alaska" to help build the pipeline.

"The Trump administration is behind this project," Alaska Gov. Mike Dunleavy said in an exclusive interview with the Korea JoongAng Daily in December last year. "They believe that this gas could help Korea diversify its gas portfolio so that it doesn't have to rely on one or two or three gas deliveries." 

BY SARAH CHEA   [[email protected]]