Imports of LNG from North America double this year... Government also considers Alaska project

(Seoul = Yonhap News) Reporter Jang Bo-in = As the war in the Middle East prolongs, Korea's imports of liquefied natural gas (LNG) from the Middle East this year decreased by more than 60% compared to the previous year, while those from North America increased by more than 100%.

As the LNG import structure changes, the government's concerns appear to be deepening as the United States pressures Korea to participate in the Alaska LNG project.

According to statistics from the Korea International Trade Association on the 17th, Korea's LNG imports from January to September this year amounted to 32.87 million tons, a 6.4% decrease from the same period last year.

By continent, imports from the Middle East decreased by 66.2% to 2.42 million tons, while Central and South America (1.37 million tons) and Europe (1.42 million tons) also decreased by 17.8% and 12.7%, respectively.

In particular, in the Middle East, LNG imports from Qatar decreased by 68.6% to 1.7 million tons. The import volume for April-June and August-September was calculated to be '0 tons'.

Qatar was Korea's third largest LNG importer last year, following Australia and Malaysia, but is experiencing disruptions in supply and demand due to the aftermath of the war in the Middle East.

On the other hand, during this period, LNG imports from North America increased by 102.9% to 7.82 million tons.

American products increased by 41.7% to 4.85 million tons, and Canadian products increased by 587.6% to 2.97 million tons.

The government has announced that it has secured replacement supplies through the United States and Southeast Asia in a preemptive response to disruptions in the supply and demand of LNG from the Middle East.

However, uncertainty is growing as the timing of global supply normalization is unclear and winter demand expands. Pressure to increase international prices is also increasing due to competition to secure supplies.

According to the Korea Energy Economics Institute, in August, JKM, an East Asian LNG price indicator, was $22.0 per MMBtu (gas amount producing 250,000 kcal), and TTF, a European gas price indicator, was $21.2, up 15.2% and 17.1%, respectively, from the previous month.

The government plans to continue to diversify import sources and create a stable supply and demand environment by increasing the proportion of mid- to long-term contracts to respond to international price volatility.

The 'strategic value' that Minister of Trade, Industry and Energy Kim Jeong-kwan recently mentioned regarding the US Alaska LNG project appears to be in line with this.

In response to a question about the Alaska project during the National Assembly audit on the 6th, Minister Kim said, "There are clearly areas where new strategic value was created through the Middle East war."

At the same time, he explained that difficulties have arisen in the introduction of LNG from the Middle East, and that supplies from the Gulf are being imported by bypassing the Cape of Good Hope due to disruptions in the Panama Canal passage.

The government has not confirmed whether to invest in the Alaska project and has stated that investment cannot be made without commercial rationality, but it has left the possibility open, citing strategic value.

However, the problem of securing commercial viability still remains.

The Alaska project has raised concerns that it is unclear whether profitability will be secured despite the enormous investment costs.

Previously, Reuters reported that the local manager of the Alaska LNG project estimated the project cost at $44.5 billion to $54.5 billion, and that "given the annual production capacity, it is $2.2 billion to $2.7 billion per million tons, the highest cost among the U.S. LNG export projects proposed so far."

There are also indications that delays in licensing and manpower shortages may be obstacles.

Bing Hyeon-ji, a professional researcher at the Korea Institute for Industrial Economics & Trade, said, "It can be seen as having strategic value in that LNG can be supplied to Korea from Alaska through the Pacific Ocean, but economic value is a different matter. We need to consider how much infrastructure costs can be offset and how to secure acquisition rights or supply conditions when investing."

It is reported that the Korean government is continuing discussions with the United States on ways to increase commercial viability. Methods such as easing the property tax burden are also discussed.

An official from the Ministry of Trade, Industry and Energy said, “We are in constant communication with the U.S.,” but added, “It is difficult to reveal the details of the negotiations.”