[2020 National Audit] "Trend of Increasing Direct Natural Gas Imports... Public Gas Fee Burden Expected to Rise"

LNG Direct Import Volume Increased to 7.26 Million Tons (18%) Last Year
Industrial LNG Direct Imports Rise... Power Public Enterprises Also Pursuing Direct Imports
Lee Dong-joo "Gas Corporation Must Thoroughly Respond to Gas Price Hikes"

Reference photo [Image source=Yonhap News]

[Asia Economy Reporter Kim Bo-kyung] As the scale of direct imports of natural gas by domestic liquefied natural gas (LNG) power generation companies increases, concerns have been raised that the gas bill burden on the general public will intensify. It is expected that LNG supply costs will increase by up to 7.3% from 2025 to 2031.

According to data submitted by Korea Gas Corporation to Lee Dong-joo, a member of the National Assembly's Industry, Trade, Energy, Small and Medium Enterprises Committee from the Democratic Party of Korea on the 20th, the proportion of LNG direct imports, which was 1% (410,000 tons) of the total in 2005 when direct imports first began, increased to 18% (7.26 million tons) last year.

Although natural gas prices have fallen due to the U.S. shale gas revolution and the sharp decline in oil consumption caused by the COVID-19 pandemic, the Gas Corporation still applies an average price. It uses a system that averages the prices of all import contracts signed by the corporation and supplies gas at the same price to all demand sectors.

The proportion of LNG direct imports is expected to grow further. Industrial direct imports are also increasing alongside power generation imports. Industrial direct imports, which were only 790,000 tons in 2016, increased to 1.8 million tons as of 2019. Some private companies such as GS Energy and SK E&S are expanding into wholesale business through overseas subsidiaries, so the share of private companies' direct imports is expected to increase significantly.

Public power generation companies are also promoting LNG direct imports. Following Jungbu Power Generation, which has directly imported 1.25 million tons annually since 2015, Seobu Power Generation (1.4 million tons), Nambu Power Generation (500,000 tons), Dongseo Power Generation (550,000 tons), and Namdong Power Generation (800,000 tons) will start direct imports sequentially from 2022.

The share of the five power generation companies in Korea Gas Corporation's sales volume for power generation decreased from 69% in 2011 to 35% in 2019, and concerns are rising that the decline will accelerate further if even the four power generation companies start direct imports.

According to the "Study on LNG Direct Import and Improvement Measures for Individual Tariff System" conducted by the Korea Energy Economics Institute, as the volume that Korea Gas Corporation can supply decreases due to direct imports, the volume that the corporation can supply at a low cost will shrink, ultimately leading to an increase in gas bills borne by the public.

The institute projected that LNG supply costs will increase by at least 6% and up to 7.3% from 2025 to 2031.

Assemblyman Lee said, "If the issue of LNG direct imports is left as it is, the general public may suffer from price increases," adding, "Korea Gas Corporation must thoroughly respond to ensure that it manages the country's overall gas supply and demand and prevents excessive increases in gas bills that general consumers have to bear."

This content was produced with the assistance of AI translation services.