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South Korea's Kogas cuts 2015 LNG imports by 13.5% to 31.41 million mt on weaker demand

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South Korea's Kogas cuts 2015 LNG imports by 13.5% to 31.41 million mt on weaker demand

South Korean state-owned Korea Gas Corp.'s imports of LNG fell 13.5% to 31.41 million mt last year, as the country's LNG demand dipped 10.6%, the company said Monday.

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It marks the second consecutive year of decline in its LNG imports. Kogas lowered LNG imports to 36.33 million mt in 2014, down 7.6% from 39.33 million mt in 2013 -- the first time the company reduced LNG imports since 2009.

Kogas, the world's biggest LNG buyer, imported 34.97 million mt in 2012, 33.97 million mt in 2011 and 31.82 million mt in 2010.

The company did not disclose how much it imported in the fourth quarter of last year. But given its imports of 22.91 million mt over January-September, the company imported 8.5 million mt in Q4, down 12.6% from imports of 9.72 million in the year-ago period.



This marked the seventh consecutive quarter of year-on-year declines following a 0.5% growth in Q1 2014.

The state utility said most of the supply was imported under 16 long-term and three medium-term contracts.

Kogas has term contracts for 11.02 million mt/year from Qatar, 4 million mt/year from Malaysia, 4 million mt/year from Oman, 4 million mt/year from Australia, 1.7 million mt/year from Indonesia, 1.5 million mt/year from Russia's Sakhalin, 1.3 million mt/year from Egypt, and 1 million mt/year from Brunei, among others, according to the company.

Kogas also plans to import 2.8 million mt/year from the Sabine Pass terminal in Louisiana from 2017 under a 20-year contract. Kogas said late last year that it has secured term contracts till 2027, of 23.5 million mt, or 62.3% of the 37.7 million mt it expects to need that year.

The 2015 imports of 31.41 million mt fell short of Kogas' plan of 33.84 million mt set in January 2015 due to declining domestic demand.

Kogas said that it sold a total of 31.46 million mt of LNG last year, down 10.6% from 35.17 million mt in 2014. The 2015 sales fell short of Kogas' target and marked the second consecutive year of decline.

In January last year, the state utility, which has a monopoly on domestic natural gas sales, said it aims to sell 33.31 million mt of LNG in 2015, down 5.3% from 35.17 million mt sold in 2014. The 2014 sales marked the first annual decline since 2009.

"The decline in sales was attributable to an economic downturn as well as greater use of cheaper sources of coal and nuclear for power generation," a Kogas official said.

Of the 2015 total, sales to power generation companies dropped 14.5% to 14.53 million mt, from 16.99 million mt 2014, while sales to retail gas companies for households and businesses fell 7% to 16.93 million mt in 2015, from 18.18 million mt in 2014.

The utility also said it recorded a net profit of Won 319.2 billion ($263.8 million) in 2015, down 28.6% from Won 447.2 billion in 2014.

Its operating profit fell 6% to Won 1.01 trillion last year, from Won 1.07 trillion in 2014. Sales revenue dropped 30.1% to Won 26.05 trillion last year, from Won 37.29 trillion.

"The revenue fell due to lower LNG supply prices as well as decreased sales volume," the company official said.

Kogas lowered city gas rates by more than 20% last year on lower LNG import costs -- a 10.3% cut in May, a 10% reduction in March and a 5.9% decline in January while in September, there was a 4.4% increase. It cut city gas rates by 9% again in January this year.

Kogas' debt decreased to Won 32.33 trillion in end-2015, from Won 37.05 trillion at the end of 2014. Its debt-to-equity ratio also fell to 321.5% at end-2015, from 381.0% at the end of 2014.

Kogas is under pressure from the government to reduce its debt, which has grown after massive overseas projects in the past few years. The government has called for Kogas to lower its debt-to-equity ratio to 274% by 2017.

The company is currently involved in 26 overseas projects in 13 countries, including 10 under development and production and five at the exploration stage.

--Charles Lee, newsdesk@platts.com
--Edited by Irene Tang, irene.tang@platts.com