South Korea to secure cheaper, American, LNG

South Korea flag
Source: DollarPhotoClub

South Korean Korea Gas Corp. plans to import 3.5 million mt/year of LNG over 20 years starting in 2017 from the Sabine Pass shale gas project in a move to replace current Middle Eastern supplies with, cheaper, American LNG.

The country’s second-biggest LPG importer E1 Corp. has signed a contract with US gas company Enterprise Products Partners to buy 180,000 mt/year of LPG produced from US shale gas starting from May or June 2014. Its bigger rival SK Gas is also looking to buy shale gas-based LPG from North America to help lower import costs.

“Natural gas as a source of power generation needs to be increased to reduce consumption of coal [that is] blamed for greenhouse gas emissions. But at stake is its costs, [which are] much higher than coal-based electricity production,” said Kim Jun-Dong, deputy minister of energy and resources policy at the Ministry of Trade, Industry and Energy.

“Import costs from the US are likely to be lower than those of LNG from the Middle East. The US shale gas boom is expected to bring down South Korea’s LNG import costs,” he added.

South Korea is the second-largest importer of liquefied natural gas in the world behind Japan. The country relies on imports to meet about 97% of its energy demand, with fossil fuel sources accounting for more than two-thirds of South Korea’s electricity generation.

“South Korea is trying to increase the portion of renewable sources in power generation, but it is not easy because it requires massive investments and long time,” Kim Jun-Dong said, adding: “The best option for us is to run more gas-fired power plants with LNG import costs going down”.

Coal is still likely to play a major part in meeting South Korean energy needs. The country is planning to build carbon capture and sequestration systems at coal-fired power plants in an effort to reduce the fuel’s negative impact on the environment.

“We cannot abandon coal as a source of power generation for the next several decades. So, the government has been investing to operate coal-fired power plants in a cleaner way that produces less emissions,” Mr Jun-Dong said.

According to the U.S. Energy Information Agency (EIA), 41 per cent of South Korean current energy needs are met by petroleum and other energy liquids, followed by coal (28 per cent), natural gas (17 per cent), and nuclear (12 per cent) with renewables and hydroelectric accounting for one per cent each.

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