Korea Gas Corporation (KOGAS) is expected to receive its first cargo of U.S.-sourced LNG under a long-term supply contract with U.S. exporter Cheniere Energy, the U.S. company said on Sunday.
KOGAS' 20-year deal commenced officially on June 1, and the first cargo was loaded the following day, Cheniere said.
The SM Eagle LNG tanker is en route from Sabine Pass to South Korea's Tongyeong, with an estimated time of arrival of June 30.
Under the terms of the 20-year Sales and Purchase Agreement (SPA) that was signed in 2012, Cheniere will be selling and making available for delivery to KOGAS some 3.5 million tons of LNG annually-a figure that is more than 10 percent of South Korea's total annual LNG demand.
As a result of insufficient domestic resources, South Korea relies on imports to meet around 98 percent of its fossil fuel consumption, according to the EIA. South Korea is the second-biggest LNG importer in the world behind Japan.
Until now, Korea had relied mainly on Middle Eastern suppliers for its LNG, including Qatar and Oman.
According to Korea Herald, KOGAS will import some 1.5 million tons this year, which will raise Korea's annual natural gas import to 36 million tons.
"The destination-free US LNG will greatly increase the flexibility and efficiency in the global LNG market," KOGAS president & CEO Seung-Hoon Lee said in the Cheniere press release.
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In the future, KOGAS may increase its imports of U.S. shale gas, if the price remains competitive.
"Under the current circumstances, the overall imported amount of natural gas is expected to increase in the future, on the back of the new administration's energy policy," a spokesperson for KOGAS told Korea Herald.
The new government is expected to release later this year estimates about how much natural gas the country would need to import under long-term electricity and energy plans.
By Tsvetana Paraskova for Oilprice.com
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