Korea Gas (KOGAS), South Korea’s dominant liquefied natural gas (LNG) buyer, has launched a new strategy designed to overhaul its business, worth a total investment of $9 billion (10 trillion won) that should also create 90,000 new jobs, the company said.
The move comes amid South Korean President Moon Jae-in’s pivot to replace nuclear power and coal fired thermal power plants with renewables and increased natural gas usage. South Korea is currently the world’s third largest procurer of LNG after Japan and China.
Nuclear generation accounts for nearly one third of South Korea’s electricity generation and about 22 percent of installed generating capacity, according to the U.S. Energy Administration’s (EIA) most recent analysis of the country’s energy sector. South Korea, Asia’s fourth-largest economy, currently generates 45 percent of its electricity from coal, while LNG meets 17 percent of power demand and renewables current only represent a 6 percent share.
Under Moon’s reforms, coal-fired power generation is projected to decline from 40 percent to 21 percent of electricity generation capacity by 2030, while nuclear power will drop from 30 percent to 22 percent, and be replaced by gas and renewable resources.
Details of the KOGAS 2025 program will worked out with the government, KOGAS said, adding that the project would involve supporting the natural gas industry, working on hydrogen and LNG bunkering, creating jobs, reorganization of its overseas business and driving technology development.
Some $5.4bn of the planned investment will go to domestic projects, $2.7bn to overseas projects and $900 million to innovation, by 2025. KOGAS said it would cut costs through renegotiating existing contracts, agreeing new contracts and “improving solidarity with other buyers in East Asia” to reduce tough terms, such as destination clauses.
In the last few years there has been a move in the LNG industry, led by Japan and India, to renegotiate long term off-take agreements, and to remove restrictive destination and other clauses, while new agreements are also offering more flexible contract terms.
Investments will also go into expanding LNG storage capacity and also into bunkering and transportation, KOGAS said. The company added that it would also focus on hydrogen, with the company planning to have a role throughout this feedstock’s value chain.
KOGAS intends to have 100 hydrogen fuel stations and distribution centers built by 2022. In addition to its operational plans, the company intends to become more profitable, in part through co-operation with private companies, with a focus on downstream gas opportunities.
Currently, Qatar is South Korea’s main LNG supplier, importing 11.75 million tonnes last year, according to BP’s Statistical Review of World Energy. Total South Korean LNG imports hit 37.96 million tonnes last year, behind Japan and China.
KOGAS was previously the single-largest buyer of LNG in the world but was supplanted by the recent creation of JERA, a Japanese joint venture.
The KOGAS plan to use to more LNG will prove a boon for the US-LNG sector, particularly in the mid-term as more projects are trying to receive FERC approval as well as attracting long term buyers for those volumes. New U.S.-based LNG projects can also offset the potential loss of Chinese funding and long term Chinese buyers by attracting more South Korean interest, something that should also give American negotiators bargaining power over their Chinese counter parts amid new trade talks in Washington on Thursday and Friday.
Moreover, Seoul has already indicated it wants to sign more deals with American LNG producers to help offset the growing trade imbalance between Washington and Seoul. However, South Korea has already made moves to reduce its trade imbalance with the U.S. last year amid pressure from President Trump.
Data from the Korea International Trade Association shows that South Korea ended up more than doubling its purchases of US semiconductor manufacturing machinery last year to $6 bn, while LNG imports increased to $806 million from only $11 million in 2016. However, according to Trump more is needed. South Korea imported its first U.S.-LNG cargoes, procured on the spot market, at the start of last year.
By Tim Daiss for Oilprice.com
More Top Reads From Oilprice.com:
- U.S. Sanctions Wreak Havoc On Russia’s Oil Industry
- China Slaps 25% Tariff On U.S. Oil Products
- Energy Is A Breaking Point In NAFTA Deal