Regional LNG: Strong Korean gas demand creates opportunities for Australian LNG: ABARE

Following is a media release from the Australian Bureau of Agricultural and Resource Economics (ABARE):

21 August 2003 -- ?Korea?s strong forecast growth in natural gas demand above existing supply contracts means that Korea will require significant additional volumes of natural gas in the near future,? ABARE?s Executive Director, Brian Fisher, said today when releasing ABARE?s latest research report, LNG in Korea: Opportunities for Growth.

Natural gas is projected to remain one of the fastest growing fuels in Korea, averaging 5 per cent growth a year over the period 2001?15 to reach 33 million tonnes. This will be underpinned by the increasing use of gas in households, by industry and in power generation.

?A critical issue for Korea is that natural gas supply plans have not kept pace with projected demand and a significant gap between demand and supply could develop over the next decade?, Fisher said. ?While Korea has in place medium and long term contracts to import 19 million tonnes of LNG a year, this is insufficient to cover its gas requirements over the medium to longer term.?

Taking into account the expiry of some existing LNG contracts, supply in 2010 could be 8 million tonnes lower than Korea?s projected natural gas demand. By 2015, this shortfall could be around 20 million tonnes. ?This situation is being exacerbated by delays in implementing gas market reform in Korea, because the Korean government is unwilling to enter into new long term LNG supply contracts until the reform process has been resolved,? Fisher added.

To date, all natural gas use in Korea has been met by imported LNG and Korea is the world?s second largest importer of LNG after Japan. "LNG will continue to meet the majority of Korea?s projected demand although, over the longer term, pipeline natural gas imports from the Russian Federation could provide a complementary source of gas supply. The introduction of pipeline natural gas will depend significantly on its competitiveness with imported LNG, although non-economic factors, including energy security and geopolitical concerns, could play a role in the decision making process," he said.

?To date, Australia has had a limited role in supplying LNG to Korea, although Korea recently signed a contract with North West Shelf Australia LNG for 0.5 million tonnes a year for 7 years from late 2003,? Fisher said. ?Long term commitments from a buyer such as Korea could underpin the development of a number of Australia?s proposed LNG export projects.?

A Korean language version of the study will be released in Seoul on 28 August 2003. (end of release)