Korea Gas seeks suppliers for LNG worth $16b
Korea Gas seeks suppliers for LNG worth $16b
Bloomberg
Seoul
Korea Gas Corp., the world's biggest buyer of liquefied
natural gas (LNG), will this week start seeking offers for more
than US$16 billion worth of the fuel to replace a 20-year
Indonesian contract that expires in 2007.
Korea Gas plans to invite companies including Royal
Dutch/Shell Group to supply 5.3 million metric tons, worth about
$830 million, of the fuel each year for 20 years beginning in
2008, said Jung Joon Suk, an official in Korea Gas's LNG
purchasing team.
"We will send letters to our existing long-term suppliers
and new suppliers, including those in Sakhalin, this Friday,"
Jung said in a telephone interview in Seoul. "We want to receive
bids by Sept. 20 and choose more than one potential supplier by
the end of September for serious talks."
Korea Gas, a state-owned utility, is seeking price cuts of
about two-fifths and more flexible supply terms in its new
contracts, Chief Executive Oh Kang Hyun said in May.
Buyers have sought lower prices because of an increase in
supplies as producers including Australia, Malaysia and Indonesia
are expanding or planning to build new LNG plants.
A Royal Dutch/Shell Group-led venture, which is seeking
Asian buyers for oil and gas from their Sakhalin 2 project in
Russia's Far East, said it can be more flexible in delivery than
competitors to accommodate South Korean demand, which rises
during winter.
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. The Indonesian LNG plant is supplied by natural gas from
Exxon Mobil Corp. fields in northwest Indonesia.
Korea Gas wants to pay about $3 per million British thermal
units under new contracts, Oh said. It now pays between $4.50 and
$5 per million BTU for LNG from Indonesia. At $3 per million
British thermal units, 5.3 million tons of the fuel is worth
about $830 million.
Korea Gas imports almost all of its natural gas under long-
term contracts from Indonesia, Malaysia, Qatar, Brunei, Oman and
Australia.
Last year, the company imported 19.43 million tons of LNG,
of which 2 million tons were made up of individual cargoes for
immediate delivery.
The volume Korea Gas is seeking is more than double the 2.3
million tons a year it buys under contract from Indonesia. South
Korea's gas demand is expected to rise 5 percent annually over
the next 10 years, BP Plc., Europe's largest oil company, said in
its 2004 Statistical Review of Global Energy.
Korea Gas said it expects the country's gas demand to rise
to 23.2 million tons in 2007 from an estimated 21.3 million tons
this year.
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
Indonesian oil and gas regulator BPMigas, said in June.
Korea Gas last week said it received bids from Shell's
Malaysian venture and three others to supply about $1.9 billion
worth of the fuel over a four-year period beginning in December.
LNG is natural gas that has been chilled into liquid form so
that it can be transported on a ship. Buyers turn LNG back into
gas so it can be piped to power plants and households.