South Korea and Japan Agree to Share Liquefied Natural Gas

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Researched by Industrial Info Resources East Asia (Kofu-shi, Japan)--Japan and South Korea plan to negotiate the terms of an agreement regarding the joint procurement of liquefied natural gas (LNG). Leaders from both countries aim to begin talks next week in hopes of not only sharing LNG in the face of rising costs, but also the possible sharing of LNG tankers. South Korea's currency has been weakened by Europe's economic trouble and both countries hope to cut import costs to ease the strain on end users, such as utility customers.

Japan, the world's largest importer of LNG, imported approximately 70 million metric tons of LNG last year, an 8.5% increase from the previous year. The rise in imports was primarily due to recovery from previous global economic problems and additional fuel needed to pull the country through extreme peak season temperatures. This year, Japan's LNG imports are expected to reach nearly 80 million metric tons due to a major decline in nuclear energy usage following the Fukushima Daiichi accident.

South Korea, the second largest LNG importer, is also noting a significant rise in LNG imports for the same reasons as Japan. Last year, approximately 33 million metric tons were imported, up from the 25 million metric tons of 2009. This year, however, LNG imports spiked in September, rising 59% year-over-year (y/y). The rise in imports in September was due to power outages caused by unseasonably warm temperatures, failure to conserve and maintenance outages.

Both Japan and South Korea are currently constructing new LNG terminals. As of now, South Korea only has four terminals, though Korea Gas Corporation (SEO:036460) (KOGAS) (Seongnam, South Korea) is building a new terminal in Gangwon province. The project is due for completion in 2016, while the full completion of Japan's new LNG terminal on the western coast of Japan is not expected until 2018. Inpex Corporation (TYO:1605) (Tokyo) is increasing Japan's annual importation capabilities by 8 billion cubic meters.

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