LNG

South Korea, the third-largest Asian liquefied natural gas importer, may be seeking more short-term cargoes after temporarily suspending one of its nuclear reactors on April 9 for safety reasons.

A statement from Korea Hydro & Nuclear Power Co. (KHNP) said that the No. 2 reactor at the Kori Nuclear Power Plant, located at the port of Busan, about 325 kilometres (202 miles) southeast of the capital Seoul, was halted on April 8 upon the expiry of its 40-year permission to operate.

The Kori-2 unit began commercial operations in April 1983 as the country's third nuclear reactor.

Currently, South Korea operates 18 out of its 25 nuclear reactors and this closure takes it down to 17.

The shutdown comes at a time when the Korean Ministry of Trade, Industry and Energy has plans to also cut coal-fired power generation by around half (from 42 percent to 22 percent) through 2030.

Phase-out policy

The new Government of Yoon Suk Yeol had reversed the previous government’s nuclear phase-out policy and has been working to expand nuclear power generation to 30 percent of the country's total by 2030, with the figure for 2021 coming to 27.4 percent.

South Korea’s LNG imports had risen to an annual 47 million tonnes and plans to have more nuclear power to replace higher-priced LNG have now been affected by the Kori-2 plant closure.

The largest LNG suppliers to South Korea are Qatar and Australia with around 11 MTPA of cargoes each followed by the US and Oman.

South Korea sources all of its gas from LNG imports more about 55 percent is used to generate electricity with 16 percent used as chemical feedstock or a source of heat and 26 percent allocated to the commercial and residential gas sectors.

The company responsible for the Kori-2 nuclear reactor is Korea Hydro & Nuclear Power Co. (KHNP).

Huge losses

KHNP is itself a unit of Korea Electric Power Co. (KEPCO), a company 51 percent owned by the government and which is in the middle of a financial crisis after reporting huge losses in 2022.

The utility’s losses reach 30 trillion Korean won ($23 billion) in 2022, though has been kept viable by the Government allowing an increase in its debt ceiling and for giving permission to raise power prices.

As regards the Kori-2 nuclear reactor, the Government explained that the suspension was “inevitable” as the process to extend its lifespan has been delayed due to the previous government's policy to phase out nuclear power.

The new plans involves keeping the Kori-2 plant open until June 2025.

However, even if the government’ re-opening procedures are speeded up the closure is expected to last for two years.

European natural gas market prices and Asian spot LNG cargo values slipped to near last year’s levels as hotter weather temporarily dispelled gas supply concerns and available shipping remained short for the Northern Hemisphere winter to come.

Sept 30 (LNG) - South Korea said it would raise domestic natural gas prices for civilian users in October because of soaring LNG import prices. The Ministry of Trade, Industry and Energy said natural gas prices for households would increase by 15.9 percent and the price rises for commercial users would range from 16.4 percent and 17.4 percent.

   Korea Electric Power Corp. (KEPCO) said it would also raise fourth-quarter electricity rates for households and industrial users because of high costs and the company’s increasing losses. KEPCO said it had decided to raise the adjusted unit fuel cost by 2.5 Korean won (US$0.002) per kilowatt hour for the October-December period. The increase is in addition to a 4.9-won rise the government has already decided to apply for electricity from October.

South Korean steelmaker and LNG importer POSCO has been engaged in damage restoration work after a typhoon and was planning to re-start the Pohang steel complex as the gas-fired power plant using regasified LNG is returned to normal capacity.

Japanese trading houses and energy companies Mitsui & Co. and Mitsubishi Corp. have formally joined the new operating company for the Sakhalin II LNG export plant in the Russian Far East.

A Russian statement said Mitsui and Mitsubishi have taken stakes of 12.5 percent and 10 percent respectively in the new operating company, Sakhalinskaya Energia.

The former operating company Sakhalin Energy had Gazprom as the majority shareholder with 50 percent plus one share while Shell had 27.5 percent of the shares and Mitsui and Mitsubishi 12.5 percent and 10 percent, which they now hold in the new company.

Shell decided to withdraw from operations in Russia after the invasion of Ukraine, though its exit path from Sakhalin LNG is not clear and the shareholding could eventually revert to Gazprom.

After the Shell pull-out, Russian President Vladimir Putin ordered in June 2022 that the Sakhalin LNG company’s assets be expropriated and passed on to a new entity.

In the latest statement, the Russians cited Shell Chief Executive Ben van Beurden as saying on July 28: “It's highly unlikely that we will become a member of a Russian legal entity to which our share in Sakhalin Energy may be transferred. It's not consistent with our intention to keep our assets in Russia. It creates a little bit more uncertainty about how exactly we will exit.”

The Sakhalin plant began LNG exports in 2009 and has annual capacity from its two Trains of around 10 million tonnes per annum with shipments going to Japan and South Korea.

Concerns

The Japanese government has backed Mitsui and Mitsubishi in retaining their Sakhalin LNG stakes and officials were cited as saying that potential Chinese shareholders could replace the Tokyo-based companies.

“In accordance with the notification of Mitsubishi Corp. on the consent to take ownership of a share in the authorized capital it will be transferred to a fully owned subsidiary of Mitsubishi,” said the Russian statement.

The previous Mitsubishi share in the Sakhalin plant was held by its subsidiary Diamond Gas Sakhalin and a 10 percent stake has been passed to it.

The Russian statement added that the 12.5 percent stake of Mitsui had been transferred to a company subsidiary registered in Dubai in the United Arab Emirates and called MIT SEL Investment.

The new Sakhalinskaya Energia company was incorporated in the capital of Sakhalin Island, Yuzhno-Sakhalinsk, in August 2022 and Gazprom was assigned its majority shareholding from the previous operating company.

South Korea, the world’s third-largest liquefied natural gas importer, is expected to see domestic demand for natural gas increase by 15 percent through the next 12 years led by gas-fired power and industrial needs.