LNG in Short Supply
Korean companies are moving to secure liquefied natural gas (LNG) whose price is soaring amid a short supply.
POSCO International signed a contract with Cheniere Energy, the largest LNG producer in the United States, in May to import 400,000 tons of LNG annually for 20 years starting 2026. It is the longest and largest LNG supply contract signed by POSCO International. Since 2018, POSCO International has been in charge of supplying LNG to all affiliates of POSCO Group.
POSCO International has recently decided to merge with POSCO Energy to unify energy businesses within POSCO Group. It also announced a plan to increase its LNG trade volume from 1.31 million tons in 2021 to 12 million tons by 2030.
The terms of the contract with Cheniere Energy were favorable for POSCO International as it moved in advance of the global panic buying of LNG. “The purchase terms were agreed upon before the Russian invasion of Ukraine, so the war did not significantly affect the contract,’” a POSCO International official said.
According to the World Bank, the natural gas index compiled by combining natural gas prices by region stood at 343.27 in July, more than three times higher than a year ago (112.68). This was the highest level since the World Bank started calculating it in 1977. Natural gas prices are under further upward pressure as Australia, the world’s largest LNG exporter, is considering reducing exports.
In Korea, Korea Gas Corp. (KOGAS) has monopolized LNG import and supply for 40 years in order to secure price competitiveness. However, starting with POSCO in 2005, a growing number of companies began to directly import LNG for their own consumption. As a result, the amount of direct LNG imports expanded to 20 percent of Korea’s total LNG imports.