Kogas looks for supplier for expired LNG contract

Korea Gas, the world's biggest buyer of liquefied natural gas, will this week start seeking offers for more than US$16 billion ($22.3 billion) worth of the fuel to replace a 20-year Indonesian contract that expires in 2007, Bloomberg reported.

Korea Gas plans to invite companies to supply 5.3 million metric tonnes of LNG for 20 years beginning in 2008, Jung Joon Suk, an official in Korea Gas's LNG purchasing team, said Monday.

"We will send letters to our existing long-term suppliers and new suppliers, including those in Sakhalin," Jung said. "We want to receive bids by September 20 and choose more than one potential supplier by the end of September for serious talks."

Korea Gas, a state-owned utility, is seeking price cuts of about 40 percent and more flexible supply terms in its new contracts, chief executive Oh Kang Hyun said in May.

Buyers have sought lower prices because of an increase in supplies as producers, including Australia, Malaysia and Indonesia, are expanding or planning to build new LNG plants.

A Royal Dutch/Shell Group-led venture, which is seeking Asian buyers for oil and gas from their Sakhalin 2 project in Russia's Far East, said it could be more flexible in delivery than competitors to accommodate South Korean demand.

Korea Gas wants to find a replacement by the end of this year for the LNG that it imports from Arun plant. The Indonesian LNG plant is supplied by natural gas from ExxonMobil fields in Aceh.

Korea Gas wants to pay about $3 per million British thermal units under new contracts, Oh said. It now pays between $4.50 and $5per million BTUs for LNG from Indonesia.(*)