Korean Energy Minister Urges Changes in Gas Pricing Structure

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  • Asian price premium on gas and LNG supplies affects regional demand, Gastech 2014 is told
  • Oil indexation price mechanism and destination contract clauses should be re-examined
  • Developing an Asian gas trading hub is essential for the region

Seoul, 24 March 2014 – Changes in the pricing structure of natural gas and LNG are needed if Asia is to take full advantage of the “golden age of gas,” Yoon Sang-jik, Korea’s Minister of Trade, Industry and Energy told the opening session of Gastech 2014, the world’s leading gas and LNG conference and exhibition, in Seoul. Yang told more than 2,000 conference delegates attending Gastech that “we need to improve the flexibility of the global natural gas market. The Northeast Asian market has been burdened by inflexible contract conditions and rigid pricing practices. As a result, consumers in this region have been paying the so-called ‘Asian Premium,’ which prevents both consumers and producers from fully enjoying the benefits of new opportunities” in the global gas sector. “We must address this issue and allow gas to be traded more freely for the sake of the efficiency and the potential of the Northeast Asia market,” Yang added. He called for re-examining the oil indexation price mechanism and the destination clause in supply contracts, which “are the most urgent matter for improvements.” These factors have been commonly cited for keeping natural gas and LNG prices high in Asia. Asia now consumes nearly two-thirds of the world’s LNG supplies and Korea is the world’s second largest importer of LNG. Jang Seok-hye, President and CEO of the Korean Gas Corporation, also raised the issue of the Asian gas premium in his keynote address to the delegates. “Strong demand, combined with oil-linked LNG pricing, has driven prices higher in the Asia-Pacific, creating the so-called Asian premium.” He suggested that the development of an Asian natural gas trading hub would help promote cooperation between energy producers and consumers.

“Developing a natural gas trading hub in Asia has been hit by setbacks including various regulatory issues, lack of cross-border pipeline networks and rigid long-term contracts. But these issues are not limited to Northeast Asia. An Asian gas trading hub will bring about benefits to the global gas industry in terms of both quality and quantity,” said Jang. Meanwhile, Maarten Wetselaar, acting upstream international director for Shell, warned that although the outlook for the gas industry looked bright, its rise is not inevitable.

"Gas as the world's primary energy source should not be taken for granted," said Wetselaar.  "Without policy support and continuous innovation, the world will not realize what natural gas has to offer.”

He cited the possibility that coal could remain the world’s dominant fuel unless there is robust policy support for developing natural gas. "Clear government policy is needed to prevent coal from making a comeback, and polluting Tokyo and Seoul," he said.

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Gastech 2014 Korea will bring together thousands of commercial and technical industry professionals for unrivalled networking, new business opportunities, the exchange of ideas and to showcase the latest innovations, technologies and developments across the gas value chain. The 2012 event attracted over 14,000 industry professionals, 350 international exhibitors and 2,000 conference delegates. Hosted by KOGAS with support from industry associations and media, as well as a respected conference Governing Body, Gastech is an event run by the industry, for the industry. Comprising a large-scale exhibition and high-level conference, alongside exceptional networking, make sure your organization is seen at the must-attend industry event in the global gas calendar. For more information please visit www.gastechkorea.com or contact Samantha Ling, +44 (0) 203 615 2850 or email marketing@gastech.co.uk

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