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Largest Korean LNG buyer wants Alaska gas Creative thinking: Kogas considers new supplier/buyer risk sharing arrangements to secure diversified, stable LNG supply Steve Sutherlin PNA Associate Editor
In 2001, the Asia-Pacific region will burn 75.6 million tons of liquefied natural gas. That figure will bump to 176 million tons in 2015, based on the most optimistic projections of Korean Gas Corp., Korea’s largest buyer of LNG.
Jong-Sool Kim, Kogas senior executive vice president, told an audience at the Pacific Rim Construction, Oil and Mining Expo in Anchorage Feb. 20 that his company is interested in Alaska gas to diversify its supply sources. In fact, Kogas would consider new types of supplier/buyer risk sharing arrangements, through partnerships or other creative agreements, in order to secure Alaska gas for the future.
Kogas is open to flexibility in contracts, such as take or pay provisions, and Kogas would consider participation in production risk, Kim said. On the other side of the buyer-supplier divide, Kogas would consider arrangements that would allow producers to share in downstream activities, such as partnerships in LNG trading, or power generation.
Korea deregulating Such creative thinking at Kogas has been spurred in part by sweeping changes in the Korean gas industry. Korea is in the process of deregulating its natural gas marketplace, and Kogas, while it enjoys a commanding lead, will have to make significant investments to keep its leadership position as the economies of scale improve and gas demand rises in Korea.
Because of the large demand and steady growth in Asian-Pacific LNG consumption, Kogas expects LNG prices to remain strong in the region, Kim said.
“There is an Asian premium on LNG prices,” Kim said.
LNG is rising rapidly in percentage share of Korea’s energy mix, Kim said. By 2010, Korean LNG demand is expected to jump by 10 million tons annually over the 17.7 million tons the country burned in 2002. Political stability important To meet that demand, Kogas will double its LNG storage capacity by 2015. It will expand its power generation capacity, and expand its residential, commercial and industrial fuel grids.
Currently, Kogas supplies 66 cities and counties. Its LNG supply comes principally from Indonesia, Malaysia, Brunei, Qatar and Oman. Kim said Kogas was formed in the mid-1980s by the Korean government, to introduce LNG and reduce reliance on Middle East oil, but the country still relies heavily on Oman and Qatar for LNG. Those nations are farther from Korea than Alaska, in a region that is not as politically stable, he said.
In 2012, Kim said, a Chinese-Russian pipeline will come on line to supplant some of the Middle East supply, but there will continue to be a market for Alaska gas because of the growth rate of consumption in Korea.
Kogas expects demand and prices in the region, and in Korea, to remain high into the foreseeable future.
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