Government Growing LNG Ecosystem... Expanding Disposal Scope of Natural Gas for Ships

Partial Amendment to the Enforcement Decree of the Gas Business Act Approved at the Cabinet Meeting

Korea Shipbuilding & Offshore Engineering Secures Orders for 9 Ships Worth 1.33 Trillion KRW
(Seoul=Yonhap News) Korea Shipbuilding & Offshore Engineering announced on the 10th that it has secured orders for 9 ships worth approximately 1.33 trillion KRW from three overseas shipping companies. The photo shows the sea trial of the world's first LNG-powered large container ship built by Hyundai Heavy Industries Group. 2022.1.10
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[Asia Economy Sejong=Reporter Lee Jun-hyung] The government is accelerating improvements to the liquefied natural gas (LNG) system, including expanding the disposal scope of natural gas for ships. Related industries such as 'LNG bunkering' are expected to gain momentum.

The Ministry of Trade, Industry and Energy announced that the partial amendment to the Enforcement Decree of the Gas Business Act was approved at the Cabinet meeting on the 3rd. The main goal is to improve the natural gas supply and demand management system and to revitalize the natural gas business for ships.

Specifically, the disposal scope of natural gas for ships has been expanded. According to the amended decree, natural gas business operators for ships can exchange natural gas with self-consumption direct importers and others. The Gas Business Act defines self-consumption direct importers as "business operators who directly import natural gas for consumption purposes such as power generation or industrial use as prescribed by Presidential Decree." This means that the targets to whom natural gas business operators for ships can dispose of natural gas have significantly increased. Previously, when the government implemented the natural gas business system for ships in August 2020, it restricted the disposal targets of natural gas business operators for ships to ships and other natural gas business operators for ships to prevent market disruption.

Prospects for Benefits in LNG Bunkering and Related Industries

Industries related to LNG bunkering, which supplies LNG to ships, are expected to benefit. The LNG bunkering industry has entered a full growth trajectory as the International Maritime Organization (IMO) tightened regulations on ship emissions. LNG-powered ships, which use LNG as fuel, emit less carbon dioxide compared to conventional ships and are gaining attention as next-generation vessels. The government also believes that through this amended decree and related system improvements, the natural gas business for ships can establish itself as a representative new natural gas industry.

To foster the ship LNG industry, the government also amended the Enforcement Decree of the Petroleum Business Act last year. This was to refund import charges on natural gas for foreign-going vessels traveling between Korea and other countries. The existing Petroleum Business Act considered fuel for foreign-going vessels as export goods and refunded import charges accordingly. However, the refund system was designed mainly around petroleum products, which were the primary fuel for existing ships, and did not include refund regulations related to natural gas for ships. The amendment to the Enforcement Decree of the Petroleum Business Act now treats natural gas for ships as export goods and refunds import charges. This amendment was approved at the Cabinet meeting in December last year and has been in effect since this year.

A bird's-eye view of the 5th liquefied natural gas (LNG) terminal in Dangjin, promoted by Korea Gas Corporation.
[Photo by Asia Economy DB]

Establishment of Adjustment Orders for Private Direct Importers

A foundation has also been established for stable supply and demand management of private natural gas direct importers. The amended decree formalizes adjustment orders related to construction plans for gas supply facilities of self-consumption direct importers, the scale and timing of natural gas export/import volumes, and sales/exchanges with gas wholesale businesses. This is a follow-up measure to the '14th Long-term Natural Gas Supply and Demand Plan' announced by the government in April last year. Reporting regulations on the implementation status and performance of gas supply plans by self-consumption direct importers, compliance with adjustment orders, and import plans and results have also been newly established. This is evaluated as providing a legal basis to include private LNG direct importers in the national natural gas supply and demand management system, alongside Korea Gas Corporation, the major LNG importer.

Private direct import of natural gas has steadily increased since self-consumption direct import was permitted in 2005. According to the Ministry of Trade, Industry and Energy, the share of private direct imports in natural gas imports rose from 13.9% in 2018 to 22.1% in 2020, an increase of 8.2 percentage points. The ministry expects that adjustment orders and reporting regulations for self-consumption direct importers will contribute to stabilizing the natural gas supply and demand.

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