South Korea's state-owned LNG importer Kogas has selected multiple suppliers in its tender that closed Nov. 24 for 10 spot LNG cargoes, mainly for delivery in the winter months of December and January, according to market sources.
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The winter procurement of 10 spot LNG cargoes comes as South Korea's energy ministry announced Nov. 25 it would close up to 16 coal-fired power plants for three months from December, out of the country's fleet of 53 coal-fired plants, as part of its annual air pollution reduction policy.
The spot procurement also comes amid record high spot LNG prices and LNG shipping rates, and is expected to support market levels and further tighten supply-demand balances after recent outages at Gorgon LNG in Australia and supply issues in Malaysia. The S&P Global Platts JKM for January was assessed at $35.987/MMBtu on Nov. 24.
Kogas awarded the 10 LNG cargoes, primarily for December and January delivery, to several suppliers as the tender conditions stated that each supplier could only be allotted four cargoes. Qatar was awarded four cargoes, and the remaining suppliers include portfolio players Shell, BP and a European utility, trade sources said.
Two of the trade sources said pricing was on a TTF basis with a premium of over $5/MMBtu, which is in line with recent market activity as market participants look to European gas prices to drive price changes in coming weeks.
A South Korean LNG buyer said there was no information about any February cargoes and the procurement indicates that inventories may need to be replenished from the second half of December, which also explains why February procurement has been delayed.
"Jan/Feb is showing a bit of backwardation and I guess some buyers do think that Feb price might get lower," the Korean buyer noted.
The tender initially called for deliveries from Dec. 1 to Feb. 28 with delivery points of Incheon, Pyeong Take, Tongyeong and Samcheok, traders said.