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South Korean Kogas' LNG sales suffer biggest decline in 14 months in Jan

Seoul — South Korean state-owned Korea Gas Corp.'s LNG sales fell 9.6% year on year in January due to weaker demand for power generation and mild winter weather, company officials said Friday.

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Kogas, which has a monopoly on domestic natural gas sales, sold 4.41 million mt in January, compared with 4.881 million mt a year earlier.

It marks the third consecutive month of decline after 12 months of rises.

The 9.6% decrease was the biggest since October 2017 when LNG sales dropped 23% on the year.

The declines for the past three months came after the state utility's LNG sales jumped 38% year on year in October, which marked the biggest increase in more than eight years since April 2010.

But the January sales were up 2.8% from 4.291 million mt sold in December.

Of the state utility's total LNG sales in January, purchases by power generators dipped 13% year on year to 1.614 million mt, which was also the third straight month of decline.

Sales to retail gas companies for households and businesses also fell 7.7% year on year to 2.796 million mt in January.

The decrease in sales to power generators is largely because the country restarted some of its nuclear reactors after months of maintenance as well as mild winter weather, according to a Kogas official.

South Korea's LNG demand for power generation is expected to slow later this year as the country's biggest nuclear reactor, Shin Kori-4, with a capacity of 1,400 MW, is scheduled to start commercial operations in September.

The Shin Kori-4 reactor has been under a test run since last week, according to state-owned nuclear power operator Korea Hydro & Nuclear Power Co.

With Shin Kori-4 starting commercial operation in September, South Korea will have a total of 25 nuclear reactors.

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The run rates for South Korea's nuclear reactors fell to an average of 65.9% in 2018 from 71.2% in 2017, which helped boost LNG demand for power production.

The lower rates were because many reactors were shut for extended maintenance for inspection because of the country's tougher safety checks.

But the rates are expected to rise this year as some reactors have restarted operation and Shin Kori-4 will start up in September, which would erode LNG demand for power production.

Kogas did not disclose how much LNG it sold in the full 2018 year, but S&P Global Platts calculations based on Kogas' previous reports showed it sold 36.22 million mt over January-December, up 13% from 32.16 million mt in 2017.

For the full 2018 year, sales to power generators jumped 19% to 16.406 million mt, while sales to households and businesses rose 7.7% to 19.813 million mt.

The increase in LNG sales last year was attributable to higher operation of natural gas-fired power plants in line with President Moon Jae-in's push to reduce the country's heavy reliance on coal and nuclear in power generation.

Under Moon's push to boost nuclear safety, many of the country's 24 nuclear reactors were shut for maintenance.

The country also closed five aging coal-fired power plants for four months from March to June as part of efforts to reduce air pollution, which also helped boost LNG consumption for power generation.

-- Charles Lee, newsdesk@spglobal.com

-- Edited by James Leech, newsdesk@spglobal.com