Kogas’ 10-year US LNG deals tied to long-term tender in 2024

State-owned Korea Gas Corp.'s deals with sellers, including Trafigura, to buy 3.3 million mt/year of US LNG for 10 years from 2028, are tied to the long-term tender Kogas launched in May 2024, Kogas said on its website Aug. 26.

"Kogas has been pushing for international bidding since 2024 for these long-term LNG contracts, and (the contracts) are evaluated to have secured competitive price levels from several suppliers, which is expected to help stabilize domestic natural gas prices in the future," Kogas said in the statement.

Platts reported in May 2024 that Kogas was looking for long-term contracts starting from 2027-2028 for up to 2.1 million mt/year, and also reported in January that Kogas had shortlisted BP, Trafigura and TotalEnergies with highly competitive bids indexed to Henry Hub and crude oil for the long-term tender.

Market sources said Kogas initially looked for a maximum 2.1 million mt/year, but the volume increased in the course of negotiations, especially after South Korea started negotiations with the US on tariffs. "Maybe the volume was increased during the discussion, supported by tariff pressure from the US," a Singapore-based source said.

Kogas has not replied to the email sent by Platts to confirm the change in contract volumes.

Trafigura said on its website Aug. 25 that "The pricing index will be Henry Hub, the US natural gas benchmark. Trafigura will meet this commitment through its offtake agreements with LNG producers, including Cheniere Energy, North America's largest LNG exporter, and Trafigura's global LNG portfolio."

Market sources said the Kogas-Trafigura trade was on a DES basis.

The Henry Hub formula is likely around a slope of 121% to Henry Hub and a constant of $4-$4.3/MMBtu, market sources said.

Volume rises on broader US-South Korea agreement

The increase in volume could be linked to the broader US-South Korea agreement to strengthen energy cooperation, an industry source said.

Trafigura highlighted in its announcement that the contracted LNG volumes will include supply from the US, which market sources said aligns with Seoul's trade deal commitments to secure more US energy.

Following the Aug. 25 White House summit between South Korean President Lee Jae-myung and US President Trump's first summit, Trump emphasized his commitment to supplying ample crude and LNG, while Seoul is expected to comfortably fulfill its $100 billion energy purchase agreement.

Another source added that the contracted 3.3 million mt/year is expected to be split among Trafigura, TotalEnergies and BP, with sellers granted flexibility on contract tenors during the SPA negotiations. Platts in January reported that the price on a crude oil-linked basis was shortlisted at around a slope of 11.3% to 11.5% to ICE Brent. Kogas initially sought supply for 7-15 years starting from 2027 or 2028 at the prices linked to either Henry Hub or Brent.

Kogas was looking to sign long-term contracts to replace some of its contracts that had expired. The company expects more contracts to expire in a couple of years.

A long-term contract for 4.1 million mt/year between KOGAS and Oman LNG expired in December 2024. Additionally, South Korea's long-term contract with Qatar Energy for 4.92 million mt/year expired in 2024.

Three more term contracts, for a cumulative volume of 1.24 million mt/year, are set to expire in 2025. In 2026, term contracts with QatarEnergy for a volume of 2.1 million mt/year will also expire.