Korea Gas Corp has agreed with the trading arm of France's EDF to funnel excess liquefied natural gas (LNG) supply into Europe and beyond, the French company said on Nov. 11.
Caught out by sinking domestic demand, Kogas, which until recently was the world's leading LNG buyer, and its Asian peers are manoeuvering to offload billion-dollar supply commitments signed when demand was peaking early this decade. Much of the new LNG comes from the United States and Australia.
Kogas will hand over up to 4 million tonnes (mt) of LNG to the trading arm, known as EDFT, over eight years from 2017, it said, representing a significant share of the company's overall LNG portfolio.
Commercial details of the deal were unavailable.
"The deal enables Kogas' participation in the European LNG market through European market access provided by EDF Trading," EDFT said.
French utility EDF's new LNG import terminal at Dunkirk is scheduled to come online later this year, providing one access route for the Korean firm's volumes into Europe.
"With the increasing uncertainties in the domestic and global market, it is of vital importance that Kogas should effectively cope with the forthcoming challenges to handle equity volume from its own LNG projects," said Seung-Hoon Lee, President of Kogas.
An EDFT spokeswoman said the deal is global in scope and not restricted to Europe, with volumes being sourced from the Kogas portfolio.
But the timing of the EDFT deal coincides with the start of Kogas' hefty supply commitments from the U.S., also beginning in 2017, which the Korean firm has been gradually passing on to other companies.
In 2011, Kogas struck a 20-year deal to take 3.5 mt/year of LNG from Cheniere Energy's pioneer export plant in Louisiana.
Last year, however, Kogas sold 0.70 mt/year of that contract to Total Gas & Power North America.
But unexpectedly weak demand and the reduced competitiveness of U.S. LNG in Asia caused by this year's plunge in crude oil prices may have led Kogas to further reduce exposures to its deal with Cheniere.
In total, Kogas is taking on 7.2 million tonnes/year of new LNG supply in 2015-2016 mostly from three Australian export plants -- Gladstone, Wheatstone and Gorgon -- with the remainder coming from Indonesia, according to data from Cedigaz.
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