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Tim Daiss

Tim Daiss

I'm an oil markets analyst, journalist and author that has been working out of the Asia-Pacific region for 12 years. I’ve covered oil, energy markets…

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South Korea Doubles Down On Gas And Renewables

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 forthcoming

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.

Related: The Next Major Challenge For Norway’s Oil Industry

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.

Related: A Saudi-Iran Oil War Could Break Up OPEC

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

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  • Chong Jin on August 25 2018 said:
    I guess that you do not know what sort of political issues currently are going on in S.Korea:)

    1. In case of communist Moon, he has been rapidly unpopular based on public opinion in Korea, because most of Korean people now learned that the President Park, Geun-hye, who is traditionally pro-American politician and now in being jailed by Moon's Government, was totally innocent and a victim of set-up crime by Moon's group. So, Moon will be impeached soon, or later, he doesn't go long much from now.

    However if Moon's group holds political power in coming months and years, he will definitely buy Russian oil and gas, not from US shale and gas sector because all of S.Koreans know that Moon is a communist.

    Of course he despises USA very much like Iran and Venezuela presidents, that is the reason, currently the ties between S.Korea and USA have been weaker and weaker as Moon's communist group wants it for China and Russia. That is reality what is going on now in Korea.

    2. Nowadays more than 86% of S.Korean people are against Moon's anti-nuclear power policy, so in conclusion, it will be not happened to switch from nuclear power generating to more LNG generating, however again if there will be any LNG consumption increased from reducing coal power - generating, the portion will be more than 95% going to Middle East and Russia esp from Sakhalin island where has the largest natural gas resources in Far East Asia Region, that means almost nothing from USA, less than 5%?

    3. These days, most of S.Koreans are very much resisting Moon's left wing dictatorship, even if most of S.Korean media, occupied by the left-wing, do not report the people's resistance like the attached Youtube link: https://youtu.be/8uAioQN7Oxo, are not reporting the truths what are really politically going on in S.Korea.

    If the innocent President Park, Geun-Hye gets back from the jail, of course, the ties between Korea and USA will be totally recovered and the portion from the removing coal-power generating will be mostly going to US natural gas developers.

    As a matter of fact, the president Park, Geun-Hye, officially talked to Korean public in the 1st half of 2016, would decrease electricity-generating from coal power plants, instead of it, Korea will increase LNG consumption although the nuclear power generating maintained at 30% of total electricity consumption in S.Korea.

    So, You have to understand the key thing in observing Korean energy market that depends on Politics in S.Korea.

    Indeed, majority of S.Koreans are not welcoming any oil and gas from Russia, means that most of Koreans will be welcoming to import more gas and oil from USA if the innocent president Park, Geun-hye gets back to where she was before impeachment from the set-up crime:)

    In conclusion, if Moon's communist group keeps the power in S.Korea, the above report by Tim Daiss will be just dreaming of US gas and oil drillers. That is the 100% reality now in S.Korea:)

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