September 26, 2022 [S&PGlobal] – The Platts JKM LNG for October breached $70/MMBtu Aug. 29 in the wake of the ongoing Russia-Ukraine war, exacerbated by discontinued pipeline gas flows from Russia to Europe.
The JKM benchmark has been easing since then, but remained elevated having been assessed at $41.722/MMBtu at the 0830 GMT Asian close Sept. 16, S&P Global Commodity Insights data showed.
SK Gas, South Korea’s largest LPG producer and LNG power generator, said in a statement released late Sept. 16 that the company will invest around Won 178 billion ($127 million) in expanding LNG terminal infrastructure by October 2024.
The primary purpose of the investment is to expand the LNG receiving terminal located in Ulsan Clean Energy Complex, which underpins the basis of clean energy business, including hydrogen, for the future.
Apart from SK Gas, GS Energy, which jointly owns South Korea’s Boryeong LNG regasification terminal with SK E&S, is planning to construct a seventh tank, due for commissioning in 2023, at the regasification terminal.
Separately, POSCO, which owns 100% of the Gwangyang LNG regasification terminal in Korea, aims to complete a sixth tank at the terminal by 2024 and plans to start up a second LNG regasification terminal in 2026-2027, a source close to the company said. The Gwangyang terminal is South Korea’s first LNG receiving terminal owned by a private firm.
POSCO’s steel and energy affiliates are building two new 2 million mt LNG storage tanks at Gwangyang, which are expected to be completed in 2025. Gwangyang is also home to the Gwangyang Steel Works, which is decarbonizing its steel production.
In addition, POSCO has developed hyrex, or hydrogen reduction. This steelmaking process makes molten metal using iron ore fines and hydrogen based on the FINEX fluidized reduction technology POSCO developed together with UK-based Primetals.
South Korean power utility, KOMIPO, or Korea Midland Power, was heard to have received government approval on its plan to build a new LNG importing terminal next to the current Boryeong LNG terminal, an industry source close to the company said.
State-run Korea Gas Corp also aims to start its new 13 million mt/year of LNG receiving terminal in Dangjin in December 2025.
Combat against energy crisis
“Due to the high LNG prices, many LNG buyers are eyeing to expand regasification terminals or adding storage tanks”, a Korean market source said, adding that having better infrastructure, such as regasification terminals and storage tanks, can prevent hiccups in LNG procurement.
“There have been active investment and expansions in LNG infrastructure over the last few years ever since the Korean government introduced green energy policies,” another Korean industry source said. “Using more gas for power generation.”
The source added that most new projects were planned based on the demand outlook, however, in the wake of high prices and short supply, the government has been quick to approve such expansions.
South Korea’s LNG-fired power generation feedstock unit costs hit a historic high this month, latest data released by Korea Electric Power Exchange on Sept. 15 showed.
The country’s monthly LNG feedstock cost for power generation stood at Won 1.845 million/mt, or $1,322.58/mt, as of Sept. 15; an all-time high since the exchange first started releasing such data in 2001. To date in September, LNG feedstock cost has jumped 17.01% month on month and spiked 140.7% on the year.
A third industry source said that increasing regasification capacity and emergency backup facilities could help LNG importers, while providing end-users with more options in a volatile market environment.
As of 2021, South Korea has 132.9 million mt/year of regasification capacity and KOGAS operates five out of the seven existing import terminals.
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