By Meeyoung Cho
SEOUL | Tue May 29, 2012 12:29am EDT
(Reuters) – State-run Korea Gas Corp (KOGAS) (036460.KS) expects to invest $2.5 billion, or 50 percent more than a year ago, to develop overseas oil and gas projects in 2012, as it races to keep pace with rising demand in the fourth-largest economy in Asia.
South Korea, the world’s No.5 crude oil importer and No.2 liquefied natural gas (LNG) buyer, has been boosting overseas resources development as, like its regional peers, it grapples with inflation driven by costlier energy and commodities.
“KOGAS will invest about 3 trillion won this year ($2.53 billion), up by one trillion won from last year, to develop oil, gas fields in Australia, Iraq and Canada along with Mozambique’s exploration business,” Chief Executive and President Choo Kang-soo told Reuters in an emailed response to questions.
KOGAS, the world’s top corporate buyer of LNG, aims to source 25 percent of its total imports from projects it owns by 2017, up from less than 5 percent now.
“We are planning to import and trade gas by developing LNG projects that utilize non-traditional gas,” Choo said, referring to shale gas and gas from coal beds, among others.
“Based upon development and production technologies, and operating experience that we will get from these LNG projects, we in the future plan to enter Chinese and Mongolian areas where non-traditional gas has as much potential as in North America,” he said in an emailed response to questions.
Choo sees South Korea’s gas demand at 34.54 million tonnes of LNG equivalent this year, up 2.8 percent from a year ago, and expects KOGAS to supply a total of 36.91 million tonnes from its inventory and imports under contracts.
KOGAS, South Korea’s sole natural gas wholesaler, will maintain 2.1 million tonnes of LNG inventory, or 30 days of consumption, to meet summer demand for cooling this year, he added.
RACE FOR SUPPLY HEATS UP AMID JAPAN DEMAND
Choo expects competition to buy gas in the short- to mid-term to heighten in Asia due to rising demand from Japan, keeping regional supply tight through 2016.
Japan’s 10 utilities burned a record 4.56 million tonnes of LNG equivalent in April to compensate for the lack of nuclear power.
A nuclear crisis at Fukushima last year sparked by an earthquake and tsunami has shredded public faith in atomic power and prevented the restart of reactors shut for routine checks in Japan, the world’s largest LNG buyer.
“A move by Japan to buy LNG on a short- and mid-term basis as it waits for nuclear power plants to resume will deepen buying competition in Asia, where supply is tight even without the Japanese factor with the region’s dependence on supply from the Atlantic Ocean region seen staying through 2016.”
($1 = 1185.3500 Korean won)
(Editing by Himani Sarkar)