NEWS
South Korea says new contracts lower LNG bill
Seoul, July 18 (LNG journal)
- South Korea said on Monday it concluded long-term liquefied natural gas import contracts with three foreign suppliers that are expected to result in savings on LNG spending of $12.5 billion over 20 years from 2008.
Four South Korean companies, including the country's largest, Korea Gas Corp. (KOGAS), have concluded 20-year supply contracts for a combined 5 million tons of LNG annually from Yemen LNG Co., Malaysia LNG and Sakhalin Energy Co., the Korean Ministry of Commerce, Industry and Energy said in a statement.
"The import price will be 38 percent cheaper on average than that of existing contracts," the statement said. "The arrangement also includes a pricing cap that limits sharp hikes in prices by the three companies."
Under the import deals, the gas cannot be priced over a certain level even if related crude oil prices continue to move to record levels, the statement said, without giving details. LNG prices tend to move in step with crude in the international market.
The South Korean government said the country now imports around 20 million tons of LNG annually and expects LNG demand to rise on average by 3.9 percent a year until 2017, when consumption will hit 31.7 million tons compared with 18.4 million tons in 2003.
Yemen LNG will provide 2 million tons of gas to Korea annually, with Malaysia LNG and Sakhalin Energy supplying 1.5 million tons each, the statement added.
In line with the government's efforts to secure stable energy sources amid rising oil prices, KOGAS and other Korean companies have been buying equity stakes abroad. Korean companies, including KOGAS and SK Corp., currently hold a 21.5 percent in the Yemeni gas development project.
