KOGAS secures stable LNG supply from United States

Korea Gas Corporation will start importing 3.5 million tons of U.S. liquefied natural gas each year from 2017 for 20 years.

Sabine Pass LNG, which signed the long-term deal to export LNG to KOGAS in January, received authorization from the U.S. Federal Energy Regulatory Commission to construct and operate facilities for the liquefaction and export of natural gas.

The approval allows Sabine Pass LNG to produce and export 16 million tons of LNG annually from the Sabine Pass LNG terminal in Cameron Parish, Louisiana.

Cheniere Energy Partners, the main developer of the Sabine Pass project, plans to begin construction of four liquefaction trains as soon as it completes additional financing of up to $3 billion, following a $2 billion financing deal with Blackstone Energy in February.

The construction of two LNG trains with an annual production capacity of 4.5 million tons is expected to begin in the first half of this year, and the construction of another two trains will start next year.

KOGAS purchased the third liquefaction train and plans to receive 3.5 million tons of LNG annually from 2017.

The price of U.S. natural gas is much lower compared to that of Europe and Asia thanks to the sharp increase of U.S. shale gas production and innovation of development technologies.

“Being the first long-term LNG contract to be signed after the Korea-U.S. free trade agreement went into effect, the deal will greatly promote the two countries’ cooperation and could lead to lower gas prices in Korea due to the removal of tariffs,” a KOGAS official said.

As KOGAS can choose where the LNG can be offloaded, overseas trading of LNG will be possible.

Korea will also have the right to place orders for ships to transport the LNG, raising the possibility of new orders for Korean shipbuilders and shipping companies.

By Kim So-hyun (sophie@heraldcorp.com)