Korea sparks gas interest

A recent move by the South Korean Government, which could be a precursor to the deregulation of its gas sector, may have reopened the door to the lucrative market for the WA-based Gorgon LNG venture and other LNG suppliers.

The Chevron-led joint venture is understood to have been disappointed after it failed to make the cut in October for part of the giant 20-year $US23 to $US25 billion LNG contract to supply State-owned monopoly, Korea Gas Corp.

However industry sources say the South Korean Government’s move to allow regional power generation companies (GENCOs) to bid directly for their own gas could bring online enough LNG demand to assist in the huge development costs of an LNG train.

Currently, KOGAS is the sole supplier of gas to the domestic Korean market.

The Gorgon joint venture is planning to build two LNG trains in WA’s north-west to supply the growing worldwide LNG demand.

The LNG from Gorgon’s first $6 billion train planned for Barrow Island will mostly supply the Chinese National Offshore Oil Corp in a deal worth about $30 billion. However, a second train to supply the US and Asia is reportedly planned. 

Chevron-Texaco marketing president Neil Theobald did not return calls from WA Business News prior to publication. 

The Gorgon joint venture, despite missing out on the KOGAS contract, is still considered well-placed in the Korean market, with Chevron holding an existing joint venture with an energy business of giant Korean consumer goods manufacturer, LG.

However, other informed sources suggest the development of an LNG train depends on a number of factors apart from contract size, including the stage and the timeframe under which demand would come on stream.

It has been reported that the Gorgon joint venture missed out on the Kogas contract because it couldn’t meet Kogas’s 2008 start-up date.

Meanwhile, the South Korean Government’s move has clouded the continuing Kogas selection process, for which the North West Venture is still considered a strong bid out of the remaining five bidders.

Kogas has responded by extending its contract award date from early December to January 10.

Not only does the decision mean the supply contracts could be adjusted to allow for a potential change in supply structure between Kogas and the GENCOs, but the new deadline is also pushed past Kogas’s Korean exclusivity arrangements with its current bidders.

North West Shelf corporate affairs coordinator Tony Johnson would not disclose the contents of the shelf’s bid, but said it remained confident of meeting Kogas’s needs.

“Our focus is on our Korean Kogas bid at this time,” he told WA Business News.