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Argus Media: South Korea’s revised gas law promotes LNG bunkering

06 Aug 2020

Jonah Foong of global energy and commodity price reporting agency Argus Media on Wednesday (5 August) published an update on the Korean government’s revised policies to lower barriers of entry to the liquified natural gas (LNG) bunkering industry and outlines its impact on fostering the fledgling sector: 

South Korea has revised legislation governing the development of its urban gas business to include LNG business for vessel use, as part of an effort to promote its domestic LNG bunkering sector.

The revised Urban Gas Business Act takes effect today and will also see the LNG bunkering sector classified separately from the existing gas market, with businesses wishing to engage in LNG bunkering subject to separate regulations.

The government expects the separation of LNG bunkering from the existing gas market, coupled with relaxations on import volumes and price regulation, to create new demand for LNG and revitalise the domestic LNG market.

The revised legislation is aimed at opening up the fledgling LNG bunkering market to more LNG suppliers to ensure robust and competitive supplies. Interested LNG bunker fuel suppliers will no longer be required to seek government approval on the price and volume of LNG imports, although the government must still be notified of any import plans.

The government has lowered the minimum requirement for private-sector firms to enter the bunkering market as LNG fuel suppliers. Firms are required to have an LNG storage tank, an LNG tank attached to a vehicle or an LNG supply vessel, as well as a minimum of 100mn won ($84,000) in capital. LNG bunkering involves the supply of the fuel from truck to ship, or from ship to ship or storage tank to ship.

South Korea has been promoting LNG bunkering by encouraging the development and distribution of “environmentally friendly” vessels, which could support demand for the use of LNG in bunkering operations, as well as vessels powered by LNG. It has already said that it will order 140 LNG-powered vessels over the next six years to support its small and medium-size shipbuilding industry.

South Korea’s LNG bunkering demand is expected to rise to 1.23mn-1.36mn t in 2030 and 3.37mn-3.43mn t in 2040, according to the Korea Energy Economics Institute. State-owned LNG importer Kogas said in 2018 that it expects demand in the domestic LNG bunkering market growing to 311,000 t/yr by 2022.

The move to foster the growth of LNG bunkering is in line with stricter restrictions on vessel emissions by the International Maritime Organisation (IMO) that came into force this year. The IMO has capped the sulphur content in marine fuels at less than 0.5pc as of 1 January from 3.5pc previously, accelerating the shift away from heavy fuel oil to cleaner bunker fuels like LNG.

Kogas signed a deal last month to set up an LNG bunkering joint venture by October with steel producer Posco, shipowner Hyundai Glovis, refiner S-Oil, Busan Port Corporation and Daewoo Logistics. Kogas plans to acquire three LNG bunkering vessels as part of the venture, two of which are expected to operate in the East Sea/Sea of Japan and South Sea and another to operate in the West Sea/Yellow Sea.

Kogas also plans to develop an LNG bunkering facility in Dangjin on South Korea’s northwest coast, with a new LNG receiving facility expected to be completed in 2025. It had said in 2018 that it plans to build a new LNG bunkering facility in the southeast of the country by 2022.

The firm owns and operates five of the country’s seven terminals with a combined nameplate import capacity of 103mn t/yr. The remaining two terminals are the 3mn t/yr Boryeong, which is jointly owned by GS Energy and SK and Posco’s Gwangyang.


Photo credit:
Argus Media
Published: 6 August, 2020

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