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INTERVIEW-S.Korea's KOGAS to seek more flexible LNG contracts - CEO
March 10, 2017 / 11:24 AM / 9 months ago

INTERVIEW-S.Korea's KOGAS to seek more flexible LNG contracts - CEO

* Seeks flexible contracts, some long-term deals expire in 2025

* Wants to bring more U.S. shale gas, interested in gas projects

* Preparing smooth transition for 2025 gas market liberalisation

By Jane Chung

SEOUL, March 10 (Reuters) - Korea Gas Corp (KOGAS), the world’s second-biggest liquefied natural gas (LNG) buyer, will seek flexible contracts to have more leeway to trade its LNG cargoes down the road, its chief executive told Reuters on Friday.

The changes would follow similar efforts by LNG buyers in Japan, the world’s top LNG importer. Companies there have been vocal about the removal of destination clauses in their long-term import contract that restrict a buyer’s ability to resell cargoes it does not need.

But KOGAS will have to wait until 2025, its long-term contracts expire, before it can start to adjust its import terms.

“Of course we are looking for flexible contracts,” Lee Seung-hoon, chief executive officer of state-run KOGAS, said in an interview in Seoul. “The market has been a seller’s market ... it would be good if buyers can swap when they are short of cargoes or they have more.”

Of KOGAS’s long-term contracts, a 4.92 million tonnes-per-year (tpy) supply deal with Qatar, Korea’s top LNG supplier, will expire in 2024 and another 4.06 million tpy deal with Oman will end in 2024. The company imports about 30 million tpy.

Lee said he was unsure if KOGAS would extend those deals “but terms will change and we won’t do it on the same terms.”

KOGAS is willing to bring more natural gas from the United States amid increasing U.S. shale gas output, Lee said.

The company signed up in 2012 for 2.8 million tpy of U.S. LNG with Texas-based Cheniere, under a 20-year supply deal starting this year. The first U.S. LNG cargoes are set to arrive in South Korea this summer.

“We intend to (buy more) but we don’t have a fixed plan....we’re thinking to import more by participating in gas liquefaction plant projects as major players,” he said.

While KOGAS is looking for flexible contracts and overseas projects, at home, it is preparing for the country’s gas market liberalisation in 2025. The liberalisation will allow private LNG importers in South Korea to sell gas to utilities and other end-users, increasing competition for KOGAS, who is currently the country’s sole LNG wholesaler.

To keep the domestic gas market from being oversupplied or undersupplied, Lee said the government is likely to set a quota for buyers and in hopes to carry out an “orderly” transition.

Lee, who took his post in 2015, said he aims to find more investment opportunities during his remaining 1-1/2 years left on the job to move KOGAS to a natural gas producer as well as a buyer. (Reporting By Jane Chung; Editing by Christian Schmollinger)

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