South Korea's Sept. LNG Imports Fall on Stockpiles

By Dinakar Sethuraman

Oct. 20 (Bloomberg) -- South Korea, the world's second- biggest buyer of liquefied natural gas, cut September imports of the fuel by 5.1 percent as demand dropped in summer and high stockpiles limited storage.

Imports of the clean-burning fuel declined to 1.84 million metric tons compared with a year earlier, according to data published today on the Korea International Trade Association's Web site. The cost of purchase increased 65 percent to $825 per ton, or about $15.7 per million British thermal units.

South Korea, the world's biggest LNG importer after Japan, imports most of its gas in winter between November and March when demand for heating surges. LNG prices have risen to more than $20 per million Btu while crude oil prices have declined by more than 50 percent, prompting power producers to switch to fuel oil.

``The inventories are high because we have to prepare for winter and this may limit imports,'' Kim In-Kee, an investor relations official at Korea Gas Corp., the country's dominant natural gas supplier, said by phone today. ``The imports are typically lower in summer as people use less natural gas because they don't have to heat homes.''

Spot Purchases

South Korea imported three spot cargoes in September from Equatorial Guinea, Egypt and Trinidad & Tobago compared with one in a year-earlier period and two in August, the report said. It paid an average price of $389 a ton for the spot supplies, with the cargo from Equatorial Guinea costing as much as $819.

South Korea paid the highest in September for supplies from Brunei at $1,036 a ton, or 125 percent more than the price of benchmark U.S. gas at Henry Hub, according to the report. The country secures multiyear supplies from Oman, Qatar, Brunei, Indonesia and Malaysia.

Korea Gas's domestic sales rose 13 percent in September, the company said on Oct. 9. Consumption of gas by households and businesses climbed 14 percent to 730,571 tons in September. Demand from power producers rose 13 percent to 788,936 tons.

``There is no connection between domestic sales by Korea Gas and LNG imports on a monthly basis,'' Kim said. ``Imports of LNG are planned in advance.''

LNG is gas chilled to liquid form, reducing it to one-six- hundredth of its original volume for transportation by tanker to destinations not connected by pipeline. On arrival it is turned back into gas for delivery to users such as power plants, factories and households.

To contact the reporter on this story: Dinakar Sethuraman in Singapore at dinakar@bloomberg.net.