UPDATE 1-KOGAS eyes more shale assets, long-term contracts to meet gas demand

Tue Mar 25, 2014 8:03am EDT

Related Topics

* S.Korea's gas demand seen topping 45 mln T LNG by 2020 -KOGAS CEO

* Wants to cut spot, short-term supply to 5 pct from 20 pct

* KOGAS, Japan cos to co-procure if more gas offered in Asia (Recasts with CEO's quotes)

By Meeyoung Cho

GOYANG, South Korea, March 25 (Reuters) - Korea Gas Corp (KOGAS) is considering investing more in unconventional gas fields including shale assets and plans to procure more of the fuel via long-term contracts, as it gears up to meet double-digit growth in South Korea's gas demand by 2020.

State-run KOGAS, the world's largest corporate buyer of liquefied natural gas (LNG), and other Asian buyers are securing gas supplies to meet demand from electricity producers and industrial manufacturers in their fast-growing economies.

South Korea's natural gas demand will top 45 million tonnes by 2020, from just under 41 million tonnes of LNG equivalent estimated this year, Jang Seok-hyo, president and chief Executive of KOGAS, told media on the sidelines of an international gas conference.

South Korea imported 39.9 million tonnes of LNG last year, according to the country's customs data.

KOGAS now procures a combined 20 percent of its gas demand in the spot and short-term supply market, Jang noted, adding it wants to reduce the proportion to 5 percent to lower price and supply volatility.

"On average, spot gas prices have cost 10 percent more than long-term supply, although spot prices were not always costlier," Jang said. "I think it is better to reduce spot and short-term procurement proportion to stabilise the supply."

KOGAS is also eyeing tapping unconventional gas fields to procure an additional 7 million tonnes a year by 2020, Jang said.

On possible joint procurement to raise competitiveness, Jang said KOGAS has fundamentally agreed with Japanese firms to buy together without competing over prices, if additional gas is available. He did not elaborate.

The head of state-run Japan Oil, Gas and Metals National Corp had said that KOGAS and a Japanese company bought natural gas jointly on Monday. Jang and other KOGAS officials, however, denied the deal. (Editing by Tom Hogue and Muralikumar Anantharaman)

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