South Korea’s efforts to wean the national energy mix off coal and nuclear energy in favour of natural gas and renewables will benefit the country’s largest LNG supplier, Qatar, a new report has shown. 
The outlook for natural gas consumption growth in South Korea remains constructive, BMI Research, a Fitch Group company, has said. 
This, it said, is largely due to President Moon Jae-in’s ongoing efforts to wean the national energy mix off coal and nuclear energy in favour of natural gas and renewable energy. 
“This will be positive for Qatar, South Korea’s biggest LNG provider, as well as Australia and the US, whose market shares are set to be bolstered over the coming quarters. 
“Our outlook for natural gas consumption growth in South Korea remains constructive, largely due to President Moon Jae-in’s ongoing efforts to reduce the domestic power sector’s heavy reliance on coal and nuclear energy, in favour of natural gas and renewables,” BMI Research said.  
Since taking office in May 2017, Moon has moved swiftly to stamp his authority in the domestic energy space, notably ordering 10 coal-fired power plants over 30 years old to temporarily shut down from March to June each year, to reduce greenhouse gas emissions, and agreeing to convert six greenfield and existing coal-fired plants to convert to run on LNG. 
He has also distanced himself from nuclear energy, reiterating plans to halt all construction of new nuclear reactors and gradually decommission 14 ageing nuclear power plants (out of 25). 
In December last year, South Korea had set a series of new long-term electricity generation targets for renewables (wind, solar), natural gas (LNG), coal and nuclear power. 
The plan is notable for its significantly lower targets for the latter two, traditionally South Korea’s top two power sources, and clearly reflects Moon’s desire to re-orient the national energy mix towards gas and renewables, amid growing safety concerns over nuclear power and souring public sentiment towards coal due to worsening air quality, BMI said.
Domestic gas sales have averaged a strong monthly year-on-year growth of 18% in the four months following the December announcement of its energy targets, a stark contrast to the average monthly decline of 9.0% observed over the May-November period. “We believe the strong growth in domestic gas consumption, and with it LNG imports, has further to go, particularly over Moon’s remaining presidential term out to 2021, amid a positive backdrop of subsidies for gas-intensive industries, lower import duties on LNG and coal-generation curbs,” BMI Research said.
Given its near-full dependency on LNG imports to meet its gas needs, the outlook for South Korea’s LNG imports is similarly positive. In addition to subsidising users in the industrial, transportation and shipping sectors to switch-over to LNG, South Korea is also contemplating allowing more non-state importers to directly procure LNG from overseas markets, which could help to lower rates and increase LNG availability. 
Apart from the state-owned KOGAS (which controls 98.0% of Korea’s LNG import capacity), only three domestic firms, Korea Midlands Power, SK E&S and GS EPS, import LNG directly from overseas suppliers, and only in small volumes.
“South Korea’s renewed focus on LNG will benefit its biggest providers, Qatar and Australia. The two countries combine to account for more than 40% of total LNG imports. KOGAS has three separate long-term agreements (out to 2032) with Qatar’s Rasgas (now merged with Qatargas) to purchase up to 12.1bcm annually,” BMI said.




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