Regional LNG: KOGAS to buy 1.8 MT of spot LNG

State-run Korea Gas Corp (KOGAS) is close to securing additional spot cargoes of liquefied natural gas (LNG), plugging a supply gap that led to a surge in imports last winter, a company source said on Monday as reported by Reuters.

Although contracts have not yet been signed, KOGAS, the world's single largest LNG buyer, said it expects to import a combined 1.8 million tonnes of LNG from Qatar, Oman and Malaysia, the source told the wires.

"We've not signed contracts yet, but we have secured the cargoes at a fairly good price compared with last year," he said, adding it would cost about five percent less than a year ago.

About 6-8 of the cargoes will be needed during the summer.

"Now that we have secured the amount in advance, we do not expect to undergo a supply shortage like the one that we had last year," he said.

The bulk of South Korea's imports are secured under long-term contracts, but a surge in power demand led KOGAS on an unprecedented spot-market buying spree last winter.

Between October 2002 and March 2003, it imported more than two million tonnes of spot LNG. At the time, supply was tight because Japan was also buying incremental volumes owing to the shut down of several nuclear power stations for safety checks.

KOGAS has bought all of Korea's LNG until this year, when steel giant POSCO Co and oil refiner SK Corp started import negotiations under rules opening the import market.

Indonesia said at the weekend it had won a 20-year contract to supply POSCO and SK Corp with 1.1 million tonnes a year of LNG.

The source said KOGAS made its latest spot purchases because a delay in the gas monopoly's privatisation meant it was not able to enter into fresh term deals.

Normally, KOGAS only buys about 2-3 spot cargoes in winter.

Industry sources said the government wants to grant term purchasing rights to new companies to be launched after the break-up of KOGAS which has already been delayed twice, industry sources said.

"As we cannot make fresh term deals anytime soon, we are tentatively securing the spot cargoes to meet demand," the source said.

KOGAS plans to buy more than 1.8 million tonnes of extra spot LNG next year unless fresh term deals are reached, he added.

South Korea imports 19.4 million tonnes of LNG per year under term supply contracts with Indonesia, Malaysia, Oman, Brunei, Qatar and Australia.

Expected domestic demand this year of 20 million tonnes would now be met by the term supply plus the spot purchases, the source said.

Last year, South Korea consumed 19 million tonnes, he said. (*)