Korea Gas Corp. (KOGAS) will annually import 1.58 million tons of LNG from the United States for up to 18 years starting from 2025. The total import bill amounts to about US$10 billion.
On Sept. 23 (local time), Chae Hee-bong, president of KOGAS signed a long-term U.S. LNG purchase agreement with Robert Lawson, chairman of gas marketing at BP at the Westin Times Square Hotel in New York.
Under the contract, KOGAS will import 1.58 million tons of LNG annually. The volume equals 5 percent of Korea's annual LNG consumption and 33.9 percent of Korea’s LNG imports from the United States in 2018. The value of the contract is estimated at US$9,612 million over 18 years. KOGAS will import U.S. LNG for 15 years from 2025 to 2039 and for three additional years.
KOGAS has been highly dependent on specific countries as it has imported a large amount of natural gas from the Middle East including Qatar and Oman. So, KOGAS has been heavily influenced by changes in oil prices by political conditions in the Middle East. In this regard, it is significant that this U.S. LNG purchase deal will enable KOGAS to diversify natural gas supplying regions. Since 2016, KOGAS has introduced 2.8 million tons of LNG annually under a long-term contract to purchase LNG from Sabine Pass in the United States. Under the new long-term contract, U.S. LNG imports by KOGAS will grow to 4.43 million tons per year beginning in the year 2025.
KOGAS is importing LNG through 11 long-term contracts with suppliers in seven countries including Qatar, Oman, Indonesia, Malaysia and Australia. Last year, the company imported 3817 million tons of LNG. Its LNG import volume reached 16.995,000 tons of LNG in the first half of this year.
In addition, the deal is expected to create economic benefits such as lower LNG import costs and lower gas bills. "The LNG price in the contract price is about 70 percent of the average of prices in previous contracts signed by KOGAS. It is the lowest among prices of U.S. LNG in contracts signed by Korean and foreign buyers of U.S. LNG including prices of LNG directly imported from the United States," a KOGAS official said.
Korea-U.S. energy trade has increased more than seven- fold since 2016. U.S. LNG exports to Korea shot up from US$1.33 billion in 2016 to US$9.4 billion in 2018. Korea has been the No. 1 LNG export market for the US since 2018. In 2018, Korea imported 5.22 million tons of LNG from the United States. Korea was followed by Mexico (3.84 million tons) and Japan (2.57 million tons).