* Australia to supply most of the gas
* KOGAS to buy 10 pct stake in Shell's Prelude LNG project
* Deals to import 5.64 mln T/yr LNG to be signed in Sept (Adds details throughout)
By Cho Mee-young and Rebekah Kebede
SEOUL/PERTH, Aug 17 South Korea announced long-term agreements on Wednesday worth $84 billion with energy giants Royal Dutch Shell (RDSa.L) and Total to buy gas from LNG projects in Australia.
Asia's largest economies are competing for Australia's rapidly growing supplies of liquefied natural gas (LNG) to secure the energy to fuel expansion.
South Korea, the world's second-largest buyer of LNG after Japan, needs the deals to replace supply from Indonesia, Malaysia and Brunei under agreements due to expire between 2013 and 2015.
State-run Korea Gas Corp (KOGAS) will import a combined 5.64 million tonnes per annum (mtpa) of LNG from 2013 to 2035 under the agreements, the economy ministry said in a statement. The volume is equivalent to about a fifth of the country's LNG imports in 2010, and the deals are due to be signed next month.
Worth 90 trillion won ($84.1 billion) over their lifetime, the deals are the nation's largest ever long-term gas supply agreements.
KOGAS, the world's largest corporate buyer of LNG, will also acquire a 10 percent stake with an additional investment of $1.5 billion in Shell's fully-owned Prelude project in Australia, the ministry said.
Analysts had expected KOGAS to buy LNG from Prelude as Samsung Heavy Industries Co Ltd is building the giant vessel in South Korea to process and liquefy gas from the project.
"Everyone has been waiting for KOGAS to sign up for Prelude because it's being built there-- it's a matter of national pride that the first floating LNG is being built in their yards. That was always going to happen," said Noelle Leonard, a consultant for Facts Global Energy.
The floating vessel will be the world's largest, a ship longer than four soccer fields and six times heavier than the biggest aircraft carrier. Prelude is expected to become the world's first floating LNG project when it starts operating in 2017, with a capacity to produce and ship 3.6 mtpa of LNG.
The purchase of a stake in Prelude adds to KOGAS's growing portfolio of projects in Australia, which is on course to become the world's second-largest LNG supplier after Qatar by the end of the decade.
KOGAS already has a 15 percent stake in the Santos-led Gladstone 7.8 mtpa project to produce LNG from coal seam gas. The South Korean firm will buy 3.5 mtpa over 20 years from the project in Australia's eastern state of Queensland.
KOGAS has also signed preliminary agreements with Chevron for LNG from the Wheatstone and Gorgon projects, and is in talks with Chevron for a stake in Wheatstone.
Industry sources said the supply deals with Shell and Total have been in the works for some time and they expected more deals to be finalized soon.
South Korea's scramble to replace its expiring contracts comes as the regional LNG sector goes through a sea change. Indonesia and Malaysia, long the top exporters and key suppliers to north Asia, are seeing their exports fall as rising domestic demand eats up more of their declining output.
At the same time, Japan's massive March earthquake has forced it to rely more on gas-fired power as it tries to compensate for idled nuclear reactors, a factor which has tightened fundamentals in the regional and global market.
Japan's demand is expected to jump over 12 percent this year alone, according to a Reuters poll of analysts.
The deals with Shell and Total would help "stabilise South Korea's LNG supplies as global energy supply concerns have been on the rise since Japan's March earthquake," the country's economy ministry said.
Seoul said it had bought the LNG more cheaply than Japan's latest agreements for Australian supply, with the ministry estimating the savings at $110 million annually compared to those deals.
"It seems that KOGAS has a discount thanks to the large volume, and such lower cost of LNG imports will help buoy South Korea's LNG demand more," said Chang Lee, head of research at Woori Investment and Securities.
Other analysts said the prices seemed roughly in line with other recent deals, but that KOGAS may have benefited from having started supply negotiations prior to Japan's earthquake. Spot LNG prices in Asia have risen about 50 percent since the quake.LNG-AS
South Korea's LNG demand is expected to remain relatively flat through the next decade, inching up to 34 million tonnes by 2024, up from 32 million in 2010, according to government estimates.
Shell and Total will supply LNG mainly from Australia's Prelude and Ichthys projects under the deals, with some additional supply coming from Shell and Total's LNG portfolios.
Ichthys has yet to receive the final go ahead from developers Inpex and Total, who are expected to take their investment decision in the fourth quarter this year and begin production in 2014. LNG project developers typically seek and sign long-term deals to sell their gas before they begin construction.
Inpex Corp said earlier this year it had secured buyers to cover the entire annual output of 8.4 million tonnes from the Ichthys project. Inpex owns 76 percent of the project, with the rest held by Total.
Shell has said it expects Prelude to come online by 2017. The ministry estimated the start up date would be in 2016. Until it can supply gas from Prelude, Shell will ship a million tonnes per year from Nigeria and Russia to South Korea, the ministry said.
Details of the deals approved by the Korean government are as follows:
-- Deal with Shell
Year Volume (in T/Y) Supplier Origin (Gas field)
2013- * 1 mln Shell Nigeria, Russia
* -2035 3.64 mln Shell Australia (Prelude)
Note: * KOGAS will receive 1 million tonnes per year from Shell's gas fields in Nigeria and Russia until Shell's Prelude project starts to export LNG. From Prelude, KOGAS will receive 3.64 million tonnes per year for 20 years, it added.
-- Deal with Total
Year Volume (in T/Y) Supplier Origin (Gas field)
2014-2031 2 mln Total Australia (Ichthys),
Nigeria, Norway, Egypt ($1 = 1070.050 Korean Won) (Editing by Jonathan Hopfner and Simon Webb)