Korea Gas delays selection of LNG suppliers to 2005: Report
Thursday, November 11 2004 - 02:31 AM WIB
Korea Gas, which is negotiating to buy LNG from ~008, had expected to sign initial agreements with potential suppliers at the end of this month.
It?s negotiating with five bidders to buy as much as 6 million tons a year of LNG over 20 to 25 years.
?The negotiations are a tough process,? Chief Executive Oh Kang Hyun said in interview in Beijing. Korea Gas expects a decision on the suppliers ?beginning next year, maybe February?, he said.
Korea Gas wants to buy the fuel from more than one supplier and the new contracts will replace an accord with Indonesia?s PT Arun NGL that ends in November 2007. In August, the state run utility invited bids from 12 gas projects in nine countries, including all seven existing suppliers, and short-listed five un named bidders last month.
Australia?s North West Shelf venture is one of the five bidders, Western Australian Premier Geoff Gallop said last month.
The other four bidders are Royal Dutch/Shell Group?s gas project off the coast of Russia?s Sakhalin Island, Total SA?s gas project in Yemen, and LNG ventures in Malaysia and Iran, the Australian Financial Review said Oct. 21, without saying where it got the information.
The company aimed to sign initial agreements with the successful two or three companies by the end of November, Oh Seung Hwan, a manager at Korea Gas?s LNG purchasing team, said last month.
?Korea Electric also wants to buy LNG directly from overseas suppliers and that may be hindering Korea Gas?s talks,? said Lee Chang Mok, an analyst at Woori Securities Co. in Seoul.
?The bulk of the volume Korea Gas wants under the new long-term contract is to supply power generators, including Korea Electric. There?s a conflict of interest.? Korea East-West Power co. and three other units of state-run Korea Electric Power Corp. in September asked the government to allow them to buy a combined 5.7 million metric tons a year of LNG from abroad beginning in 2008 to help cut their fuel bill.
?The government has already approved Kogas?s request to have five to six million tons? of LNG a year under a new contract, Korea Gas?s Oh said. The gas provider and Korea Electric will proceed with their competing plans to secure LNG supplies, he said. ?Kogas has more experience than other importers, not only in Korea but also in the world. I?m very confident and positive about the outcome.?
Korea Gas? bids for 6 million tons a year of LNG are divided into three lots, each composed of 1.5 million tons a year plus an option for a further 500,000 tons, the company said. Individual suppliers can bid for two lots at most.
Korea Gas wants to pay about $3 per million British thermal units under new contracts, Chief Executive Oh said in May.
It now pays between $4.50 and $5 per million BTU for LNG from Indonesia. At $3 per million British thermal units, 6 million tons of the fuel over 25 years is worth $23.4 billion.(*)