Regional LNG: Kogas open LNG tender 2006

State-run gas utility Korea Gas Corp. (036460.SE) is hoping to issue a new international liquefied natural gas buy tender in early 2006 for deliveries from 2010, according to an industry source Friday as quoted by MarketWatch.

The proposed tender - which is still being discussed by the Ministry of Commerce, Industry, and Energy - will seek around 4.5 million metric tons a year of LNG, the South Korean industry source said.

Some of the issues being deliberated center on the impending deregulation of the Korean gas sector, like whether Kogas can import all of the proposed LNG volumes. Other domestic companies such as Korea Electric Power Corp. have expressed interest in importing LNG for gas distribution.

Currently, Kogas holds a monopoly in importing LNG for distribution. Steel-maker Posco and K-Power have LNG import rights too, but only to supply to their own gas-fired power plants.

The new LNG volumes will help meet South Korea's rising demand for gas, which is forecast to grow to 31.7 million tons/year in 2017, from 23 million tons demand estimated for 2005. South Korea will need extra LNG imports of more than 3 million tons/year to cope with such rising demand.

Earlier this year, Kogas had signed new supply and purchase agreements to buy as much as 5 million tons/year of LNG from Malaysia LNG, Sakhalin Energy Investment Co. and Yemen LNG at $3.80-$4.20 per million British thermal units. Deliveries will commence in 2008, spanning a period of 20-years.

Kogas is also buying a 6% equity stake in Yemen LNG. The equity participation was discussed separately from the LNG supply contract and isn't a prerequisite for the LNG purchase.(*)