Regional LNG: S. Korea picks Russia, Malaysia and Yemen to buy LNG
Wednesday, February 16 2005 - 03:45 AM WIB
The country also plans to seek additional long-term LNG contracts for the supply of about 3 million tonnes per year starting from 2010, Minister of Commerce, Industry and Energy Lee Hee-beom told reporters.
South Korea's natural gas demand is set to rise at an average rate of 3.9 percent per year until 2017, hitting 31.7 million tonnes, nearly double 5the 18.4 million tonnes in 2003, the energy ministry has said.
The ministry said in a statement the preferred sellers -- Russia's Sakhalin Energy, Malaysia LNG and Yemen LNG -- would have further talks before final contracts were signed in March or April for a combined supply of 5 million tpy for 20 years starting from 2008.
The announcement came after Korea Gas Corp. (KOGAS) , the world's single-largest LNG buyer, and units of state-controlled Korea Electric Power Corp. (KEPCO) submitted on Jan. 10 their own choices of LNG suppliers for government approval. The three are all choices made by KOGAS, while none of KEPCO's proposed suppliers were accepted.
The government has set up an independent review committee to select winners after receiving proposals from KOGAS and KEPCO.
"The review process was transparent and fair, and we expect the new deals, which were offered at lower prices than existing ones and reflect strong seasonality in demand, to have a good impact and help us save costs," Minister Lee said.
The government expected to save a total of $13.4 billion over the next 20 years as the new offers were 35-40 percent cheaper than existing contracts, the statement said.
Assuming oil prices of $40 a barrel, prices of the new contracts would stand at $197-$217 a tonne versus $322 a tonne for previous contracts, the ministry said.
KOGAS, currently the sole importer and wholesaler of the super-cooled natural gas in South Korea, imports 21.3 million tonnes every year under long- and -medium term contracts with Qatar, Indonesia, Malaysia, Australia, Brunei and Oman.
Out of a total 5 million tpy, Malaysia LNG and Sakhalin Energy would each supply 1.5 million tpy, while Yemen LNG offered to supply 1.3 million tpy, Deputy Minister for Energy and Resources Policy Lee Won-gul told reporters. KOGAS would have an option to buy the remining volume when needed, he added.
Sakhalin Energy, led by Royal Dutch/Shell , operates the Sakhalin II project, one of Russia's most ambitious projects that aims to produce 9.6 million tonnes from 2007.
Total is project leader of Yemen LNG, in which U.S. energy firm Hunt Oil and a South Korean consortium led by the top local oil refiner SK Corp. also hold stakes.(*)