April 23, 2024 [Rigzone]- A new oil and gas import and storage facility in South Korea has received its first shipment of petroleum products, launching into commercial operation, the Ministry of Trade, Industry and Energy (MOTIE) said.

The Korea Energy Terminal, a joint venture between state-owned Korea National Oil Corp. (KNOC) and state-backed utility SK Gas, is part of the government’s Northeast Asia Energy Hub, according to MOTIE. Located in the Ulsan Free Economic Zone, the hub is envisioned to be a regional powerhouse for hydrogen technology development and hydrogen vehicle parts production.

Starting construction 2020, Korea Energy Terminal Co. Ltd. (KET) completed its oil storage unit December 2023. The gas storage unit is due to be completed this year, MOTIE said in the announcement.

MOTIE noted, “In 2017, Korea eased restrictions for oil traders and in 2024, the Government worked with Korea Customs Service and the National Tax Service in making amendments to allow the immediate refund of duties, value-added tax, and import levies for domestic oil refiners upon shipping out their petroleum products from bonded areas, enabling international trading companies to blend Korean refiners’ products”.

“These efforts over the years have sparked the interest of various global traders and investors towards the Ulsan energy hub”, the news release added.

KET plans to have three liquefied natural gas tanks with a combined capacity of 645,000 cubic meters (22.8 million cubic feet) and 12 oil tanks with a total capacity of 270,000 cubic meters (9.5 million cubic feet), according to information from the joint venture’s website.

“KNOC will be responsible for building and operating oil import facilities and storage tanks to ensure stability in the national energy supply, and SK Gas will build and operate LNG unloading facilities and storage tanks”, SK Gas, in which the Treasury holds a minority stake, says on its website.

LNG Overbuild?

South Korea, alongside neighboring China and Japan, is among the world’s top LNG importers. It had seven LNG import terminals with a combined regasification capacity of 153 million tons per annum as of 2023, according to global thinktank the Institute for Energy Economics and Financial Analysis (IEEFA) in a report November 29, 2023.

The IEEFA analysis said there is an LNG infrastructure overbuild in the East Asian country. “South Korea has reacted to the war-driven energy crisis by accelerating its push to build new liquefied natural gas import terminals and storage facilities despite having some of the lowest utilization rates for its existing LNG terminals”, the report said.

South Korea had 11 planned LNG terminal projects according to the November report.

“IEEFA suggests aligning the build-out with LNG demand based on Nationally Determined Contribution targets, boosting public-private efforts for efficient use of LNG receiving terminals, and avoiding the promotion of technologies and services that would prolong LNG use without aiding national climate goals”, the report said. A Nationally Determined Contribution refers to a document of commitment deposited before the United Nations by parties to the Paris Agreement. The legally binding treaty, which took effect 2016, aims to prevent the global average temperature from going two degrees Celsius (35.6 degrees Fahrenheit) above pre-industrial levels and rein in the rise further to 1.5C (34.7F).

Across the globe, the decade to 2022 has seen regasification capacity rise 49 percent to 140 billion cubic feet per day (Bcfd), spread across facilities in 48 countries, according to a report by the United States Energy Information Administration (EIA) published August 30, 2023.

While further expansion is expected, available regasification capacity has already been exceeding LNG import volumes with only 39 percent of the capacity used annually, the EIA said.

The spare capacity is used to stockpile for demand-high periods, it noted. “Spare regasification capacity, most of which is in Japan, South Korea, and China, allows countries to meet occasional demand spikes, particularly in winter”, the EIA report said. “Last year [2022], global LNG trade used 37 percent of available regasification capacity, or 51.7 Bcf/d”.

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