Taiwan Bends to Trump, Signs Pact for Alaskan LNG

Pressure grows on Seoul and Tokyo to follow suit in burning money for "Freedom Gas"

By: Jens Kastner

In a thinly-veiled maneuver to keep the Trump administration committed to Taiwan’s defense against an increasingly hostile China, Taiwan’s state-run oil refiner CPC Corp. has agreed with Alaska Gasline Development Corp (AGDC) to not only to buy US-originated liquefied natural gas (LNG) but also to participate in the project’s pricey “upstream gas investment.”

The island also is seeking to avoid drastic import tariffs Trump has threatened on Taiwanese semiconductors. On March 4, Trump announced that Taiwan Semiconductor Manufacturing Co. plans to invest US$100 billion in the US, in addition to the US$65 billion the company, the world’s biggest chipmaker, previously announced. Trump has threatened to impose high tariffs on imported chips to bring chip production back to the US.

Taiwan signed a letter of intent on March to buy Alaskan NG although it normally buys mainly from Qatar, which has one of the lowest unit costs of production in the world. Observers in Taipei are irritated that American LNG is pricier and that Taiwan is being asked to invest billions to get the Alaskan LNG flowing in the first place. The island runs a massive US$73.9 billion trade surplus with the US, its most important ally.

“This is like me helping you to build your restaurant so that you can sell me an overpriced meal,” said Angelica Oung, founder of the Taipei-based nonprofit group Clean Energy Transition Alliance, in a LinkedIn post. “But if loading up on Freedom Gas is what it takes to prevent Trump from selling Taiwan down the river, then it’s cheap at even US$12/mmBTU, compared to Qatar’s US$8/mmBTU.”

The 1,300-km, US$44 billion pipeline project is envisioned to transport gas from Alaska’s North Slope and ship up to 20 million tonnes annually, starting as early as 2030. The proposal to develop a large-scale LNG terminal in Alaska and export its gas to markets in Asia had been stalled for years, but Trump is pushing it ahead. He has been aggressively pitching the project to South Korea, Japan, and Taiwan, urging the countries to expand LNG supplies from the U.S. to help reduce their trade deficits.

Following a summit in Washington on Feb. 7, Trump announced that “Japan will soon begin importing historic new shipments of clean American liquefied natural gas in record numbers.” Taiwan's deal was signed in Taipei with an Alaskan team subsequently visiting Korea, Japan and Thailand as well. Taipei, Tokyo, and Seoul have been scrambling to gain ground in their trade negotiations with Washington, especially with the April 2 deadline for new reciprocal tariffs approaching. Japan, South Korea, and Taiwan, among others, are likely to be on the “dirty 15” list – a set of around 15 percent of trading partners that the reciprocal tariffs are expected to target.

Thamer Alqershi, a Yemen-based LNG analyst, told Asia Sentinel that despite the higher cost, the deal is driven by several strategic advantages, as opposed to solely the desire to curry favor with the Trump administration. As direct shareholders in the Alaska LNG project, Alqershi said, the Taiwanese would be able to exercise greater control over supply and to have leverage in price negotiations. Additionally, the proximity of Alaska significantly reduces transportation distances compared to Gulf Coast exports.

“This results in lower vessel investment and reduced shipping costs, while eliminating reliance on the Panama Canal, avoiding transit fees, congestion delays, or the need to take the much longer Cape Horn route,” Alqershi said. “However, its complexity, frequent delays, and high costs – nearly double those of similar projects worldwide – make it less appealing to investors. Any additional expenses, which are also expected to rise, might prevent the project from starting as planned or at all, he added.

Alqershi went on to point out that Taiwan’s investment may not be as huge as that of other countries that also seek to appease Trump. He referred to the United Arab Emirates on March 22 which committed to investing US$1.4 trillion in the US in AI infrastructure, semiconductors, clean energy and manufacturing over the next 10 years. Given that the UAE makes about US$78 billion a year from oil exports, this investment equals nearly 18 years of its oil revenue.

In terms of Taiwan’s domestic politics, the Alaska LNG deal is certain to give the “blue camp” opposition parties ample ammunition to bedevil the administration. The opposition Kuomintang (KMT) vehemently opposes the ruling Democratic Progressive Party’s (DPP) policy to phase out nuclear power with the help of increased LNG importation. Nuclear power now makes up only 2.8 percent of Taiwan’s growing energy mix, according to Taiwan Power Company.

Also, the KMT has been accusing the DPP of “gifting” Taiwan’s technological crown jewel, Taiwan Semiconductor Manufacturing Company (TSMC), to Trump in exchange for protection against China.

“I expect blue camp politicians will castigate the Lai Ching-te government for paying the US protection money and wasting the money of Taiwan taxpayers,” said Denny Roy, an expert on Taiwan's political history and a senior fellow at the US-based East-West Center think tank.

Taiwan has been in political crisis for more than a year, when the opposition KMT, which won 52 seats in legislative elections, combined with the rump Taiwan People's Party (TPP), which won eight, to outnumber those held by the governing DPP with 51, and guaranteeing gridlock. Months of intense political wrangling have ensued between the two camps. In late January, the KMT and the TPP used their combined legislative opposition majority to force deep cuts to the government budget for 2025, including cuts that impact the functioning of the government and the military.