Sober briefing vs. raucous rally: Korea, U.S. remain at odds over Alaska LNG project

[NEWS ANALYSIS]

The Donald Trump administration's announcement of Korea's investment took on the air of a raucous Republican rally at the White House on Wednesday, with the president flanked by more than a dozen senior aides and business leaders.

The Korean press briefing, on the other hand, was a still, quiet affair, with only Industry Minister Kim Jung-kwan appearing on stage to draw a line from the early U.S. announcement.

The gap in tone underscores how far apart the two sides remain on the details of Korea's $200 billion investment pledge despite a comprehensive joint statement released by the U.S. Department of Commerce and Korea's Ministry of Trade, Industry and Resources on Thursday.

Two of the three projects under the $200 billion pledge are still contested in several areas, with Seoul more worried than Washington about whether they will turn a profit.

The biggest point of contention is an Alaska liquefied natural gas (LNG) project. U.S. Commerce Secretary Howard Lutnick said Korea will invest more than $50 billion to build a gas pipeline.

Kim pushed back on Lutnick's assertion on Thursday, saying he personally raised a strong objection with Lutnick over U.S. language that went beyond what the two sides had agreed.

"The U.S. appears eager to use this project for domestic purposes," Kim said at a press briefing in Sejong following the bilateral announcement. "I raised a strong objection to that with Commerce Secretary Lutnick this morning. He responded that he understood Korea's concerns and would do his best to make the project succeed together with Korea."

The Alaska project dates back to 1968, when U.S. oil companies announced a mammoth oil discovery. Still, multiple attempts to bring it to market have been floated for more than half a century without progress, with major players like ExxonMobil pulling out. The core plan is an 807-mile pipeline from the North Slope to Nikiski, south of Anchorage, where the gas would be liquefied and shipped mainly to Asia.

Kim emphasized that things are still at the discussion stage and that nothing has gone beyond what is described in the disclosed joint statement and the fact sheet.

The documents give fewer details on Alaska than on the other two projects. It says Korea and the U.S. agreed to work on the project on the condition that it meets the commercial viability standard set by the strategic investment deal reached in November of last year and satisfies all domestic legal requirements.

"The structure of the Alaska project is simple. We judge it on commercial viability, and if it doesn't pass, we don't proceed," Kim said. "That is what Korea and the United States agreed in the fact sheet.

"The two countries' positions do differ. The U.S. is interested in the project for political reasons, for Alaska and the region, and for the LNG business. Korea's interest is in recovering the principal and interest on its investors' money. Such differences are inevitable, and we will have to negotiate hard with the U.S. once more."

President Lee Jae Myung said on X the same day that the two sides agreed to begin "working" on the LNG project, echoing Kim's point that it will go ahead only if its commercial viability is proven.

As the project develops, the United States will help Korean vendors and suppliers take part on favorable terms. Washington also gave nonbinding assurance that it plans to give Korea priority access to the project's LNG at competitive prices.

On nuclear power, the two countries agreed to build eight large reactors using up to $120 billion of Korea's investment fund. The deal could give Korean companies their first opening in the U.S. reactor market.

Of the $120 billion, $100 billion is for construction and $20 billion is a contingency reserve. Seoul and Washington will also work to send a $10 billion advance payment by the end of the year to buy long-lead items.

The eight reactors are two APR1400 units, Korea's own design, and six AP1000 units from Westinghouse. Construction will proceed in three phases: two AP1000 units first, then two APR1400 and two AP1000 units, and finally two more AP1000 units.

Under a settlement signed by Westinghouse, Korea Electric Power Corporation and Korea Hydro & Nuclear Power in January of last year, Korea has had to pay technology fees of more than 1 trillion won ($733 million) per reactor exported. The deal also barred Korea from building the APR1400 in the United States.

Westinghouse opposed revising the agreement out of concern about competition. A breakthrough came when the U.S. government, judging that Korea's construction capability is essential to expanding nuclear power, demanded a revision.

"The U.S. side worries that the APR1400's efficiency and cost are proven and better than the AP1000's," Kim said. "If U.S. utilities and developers prefer the APR1400, it could neutralize the existing arrangement. Westinghouse is clearly very concerned about this."

"Our view is that Korea and Westinghouse are bound to go together," the minister continued. "Instead of fighting over a small pie, they should rebuild trust and cooperate on a bigger one. Russia and China are rising fast in the global market, and Korea-U.S. cooperation helps us defend and expand our position."

Candidate states for the plants include Ohio, Tennessee and South Carolina, and Korea will pick the specific sites. Korean companies will also pursue a minority stake in Westinghouse to share in the commercial gains from large reactor projects.

Seoul is reportedly seeking a stake of 5 to 10 percent in Westinghouse to secure management rights, but Washington remains cautious.

"Based on the Korea-U.S. nuclear framework announced this time, we will push ahead without delay on follow-up steps, including selecting specific sites for the nuclear projects and acquiring a stake in Westinghouse," Kim said. 

The one project that is finalized is a $22.3 billion Korean investment in a gas-fired power plant in Encinal, Texas. The first phase is due to begin commercial operation in 2028, and the 6.3-gigawatt plant is scheduled to reach full capacity in stages by 2032. Kim said the plant is expected to offer a return of at least 15 percent, potentially yielding $45 billion over 20 years.

Concerns are growing over whether such a large investment can turn a profit, especially because all three projects would run in parallel once they get started. Seoul has stressed that profits from each project are split 50:50 between Korea and the United States until Korea recovers the principal and interest on its entire investment across all projects. After that, the United States takes 90 percent and Korea 10 percent.

"We discussed the [project overlapping] issue," Kim said. "Regardless, the annual cap [for total investment] is at $20 billion. Remittance schedules will have to match project progress. The most visible project is Texas, so I expect success to center on it."

BY LEE JAE-LIM, PARK EUN-JEE [[email protected]]