Qatar will play a key role in meeting the burgeoning demand for liquefied natural gas in South Korea, a new report has shown. 
According to BMI Research, South Korea's LNG imports are set to grow at an annual rate of 1%-2% over the coming years, as president Moon Jae-In's plans to gradually phase out coal and nuclear-fired power generation drive greater reliance on gas-fired electricity generation. 
“The biggest beneficiaries will be South Korea's largest LNG suppliers: Qatar and Australia,” points out BMI Research, a Fitch Group company.
“Our view for South Korea's LNG appetite to flourish under the new Moon Jae-In administration is beginning to play out, with total imports over the first half of 2017 coming in at 19.7mn metric tonnes, an increase of 18.3% y-o-y,” the BMI report said.
Monthly LNG purchases over the post-Moon period (May-June) also rose strongly, averaging annual growth of 26.2%, compared to 14.5% in the months prior.
Moon has acted swiftly to temporarily shutdown 10 older coal-fired power plants across the country and halt construction of two nuclear facilities, the Shin Kori 5 and 6, upholding his campaign pledge to reduce South Korea's reliance on coal and nuclear energy for power generation, as part of a broader move to reduce air pollution and improve safety in the power sector.
The loss in coal and nuclear generation capacity will be offset by a comparable increase in generation based on natural gas and renewable sources. Specifically, Moon's proposed power plan calls for gas' share in the total power mix to be expanded from 22% currently to 37% by 2030, while reducing that for coal and nuclear. 
Although the new administration is yet to outline specifically how it plans to achieve this target, especially amid stiff industry opposition, BMI expects continued assertive action from the government with regards to reducing the role of coal and nuclear in the domestic power mix. 
Proposed new projects in the pipeline will see significant risk of delays and cancellations under Moon's five-year term.
South Korea imports all of the natural gas it consumes in the form of LNG, due to limited domestic production. As such, greater reliance on gas-fired electricity generation will see South Korea's LNG imports strengthen over the coming years, averaging annual growth of 1-2% over the coming years. 
The biggest beneficiaries from South Korea's deepening reliance on LNG will be its largest trade partners, Qatar and Australia, which combine to account for more than half of Korea's annual imports. 
Notably, stable deliveries from Chevron's Gorg on LNG has led Australia's market share to balloon significantly from 12% in 2016 to 20% in H1, 2017.
Some 93% of South Korea's LNG imports are secured on long-term contracts, compared with 89% in 2016 and 87% in 2015, and thus, its ability to capitalise on favourable rates in the spot market is limited. 
Nonetheless, ample supplies and an increase in arbitrage opportunities have seen South Korea complement contracted supplies with the occasional odd cargoes from non-traditional markets, such as Peru, Trinidad & Tobago, Guinea and Norway.
Shipments from North American export terminals to North Asian markets have become more cost-competitive, thanks to the expanded Panama Canal. 
South Korea is already poised to account for 10% of total US LNG exports by 2020, mainly due to long-term contracts with two Texas-based LNG projects, the Sabine Pass and Freeport LNG, though this could be strengthened further as state-owned firm KOGAS continues to explore more contracting opportunities with LNG projects in Alaska, Louisiana and Texas.
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