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IEA calls for South Korea gas market reform

11.25.2012  |  HP News Services

The agency says LNG trading between Korea Gas (Kogas) and other local companies should be encouraged, with local LNG consumers given the right to select a supplier. Local companies other than Kogas are currently not allowed to import LNG for trading purposes.



The International Energy Agency has called on South Korea to shape a detailed plan for a reform of the country's natural-gas market, currently dominated by state-run supplier Korea Gas Corp., to ensure a fair competition in trade, the Ministry of Knowledge Economy said in a press release today.

Korea Gas, the largest corporate buyer of liquefied natural gas (LNG) in the world, is the country's main supplier of LNG for local companies and has faced continued disputes locally on whether the company should maintain its role as the top supplier.

The IEA noted in a report on South Korea's energy policies that LNG trading between Korea Gas, or Kogas, and other local gas companies should be encouraged and big local consumers of LNG should be given the right to select a supplier, other than Korea Gas, for buying LNG at an appropriate market price, the ministry said in the release.

Local companies other than Kogas are currently not allowed to import LNG for trading purposes. While the government has allowed companies to import LNG for their own consumption since 2001, only a few deals have materialized since then.

Earlier this year, a power-generating unit of Korea Electric Power Corp. said it struck a $3.4 billion deal with Switzerland's Vitol to buy liquefied natural gas under a long-term contract, marking the first successful attempt by a unit of Korea Electric Power at buying LNG directly from suppliers instead of purchasing through Korea Gas.

The deal had boosted hopes back then that it may pave the way for more similar deals by other local companies down the road, though they are likely to happen only slowly, over a long period.

Kogas has plans to import 36.456 million tons of LNG this year, up 7.3% from about 33.97 million tons last year.

Dow Jones Newswires

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