Korea Gas may seek LNG offers for 5.3m tons per year
Korea Gas may seek LNG offers for 5.3m tons per year
In-soo Nam, Bloomberg
Korea Gas Corp., the world's biggest buyer of liquefied natural gas, may more than double the amount of the fuel it buys to replace a 20-year Indonesian contract that expires in 2007 as the nation's demand gains.
Korea Gas plans to buy 5.3 million metric tons, or about US$827 million, of the fuel each year starting in 2008, more than double the 2.3 million tons a year it buys under contract from Indonesia, said Oh Seung Hwan, a manager in Korea Gas's LNG purchasing team.
Korea Gas wants to find a replacement by the end of this year for the LNG that it imports from Indonesia's PT Arun NGL plant, which is supplied from fields operated by Exxon Mobil Corp. The buyer is seeking price cuts of about two-fifths and more flexible supply terms in any new contracts, Chief Executive Oh Kang Hyun said in May.
Korea Gas and rival LNG buyers are seeking lower prices as projects such as Royal Dutch/Shell Group's $10 billion Sakhalin plant increase competition among suppliers.
The company wants to pay about $3 per million British thermal units under a new contract. It now pays between $4.50 and $5 per million British thermal units for LNG from Indonesia's PT Arun NGL plant, said Kardaya Warnika, vice chairman of Indonesia BPMigas, the state agency that markets the country's gas.
At $3 a million British thermal units, 5.3 million tons of the fuel is worth about $827 million.
Indonesia, the world's biggest LNG exporter, may offer a 40 percent price discount to Korea Gas as part of negotiations to extend the 20-year supply contract, Rachmat Sudibyo, chairman of BPMigas, said on Tuesday. Korea Gas said it may consider the offer.
Indonesia wants to supply buyers from the newer PT Badak NGL plant in Bontang, East Kalimantan, and BP Plc's Tangguh project, to replace declining LNG output from Arun.
Korea Gas said it aims to achieve flexible supply terms from potential sellers as the market favors buyers. Global supplies have increased as producers, including Exxon Mobil, build new plants or expand existing facilities.
"LNG prices have been too rigidly pegged to the oil price," Chief Executive Oh said last month. "We want to ease the correlation, given the abundance of global gas development projects that could begin production in 2007 or 2008."
Australia's North West Shelf venture led by Woodside Petroleum Ltd. and ChevronTexaco Corp. said last week they are planning bids to replace Indonesia's contract with Korea Gas.
A Russian delegation, led by Sakhalin Oblast Governor Ivan Malakhov, visited Korea Gas on Wednesday to market the fuel being developed by a Royal Dutch/Shell Group-led venture.
"Indonesia is desperate to continue its contract to supply Korea Gas because it fears Sakhalin," Andy Calitz, commercial director of Sakhalin Energy Investment Co., told reporters in Seoul. "Sakhalin is closer and Russia is politically more stable. We can supply more LNG in winter when Korea needs it."