South Korea's regulator weighing whether to start probe into LNG destination clauses

SEOUL/TOKYO (Reuters) - South Korea’s Fair Trade Commission (KFTC) is considering whether to start a probe into clauses in liquefied natural gas (LNG) contracts that restrict buyers from reselling the fuel to other markets, an energy ministry official said on Thursday.

Long-term LNG contracts include these terms, known as ‘destination clauses’, that prevent buyers from reselling excess cargoes to third parties, and Asian LNG buyers have been vocal about seeking their removal. South Korea is the world’s second-biggest LNG importer behind Japan.

“At the moment, the KFTC is in the stage of monitoring the situation and has not decided yet whether or not to investigate,” said the ministry official, who declined to be named as he is not authorized to speak to media. “So far nothing has been confirmed.”

South Korea imports most of its LNG through the country’s sole LNG wholesaler Korea Gas Corp (KOGAS), which brings in around 30-31 million tonnes per year of LNG, mainly from Qatar and Australia.

KFTC officials declined to comment, saying they could not talk about the matter publicly.

If the KFTC formally launches an investigation, the move would echo steps taken by Japan, whose antimonopoly regulator ruled in June that new long-term LNG contracts signed with Japanese buyers could not have destination restrictions.

South Korea’s vice energy minister, Lee In-ho, said on Wednesday at an LNG conference in Tokyo that the country was keen on having more flexible LNG contracts.

“If we can facilitate trade between regional markets for flexible volumes by improving or even removing rigid conditions including the destination clause, that will be a sure way to create new added value,” the vice minister said.

Reporting by Jane Chung in SEOUL and Osamu Tsukimori in TOKYO; Editing by Kenneth Maxwell