Dynamics of LNG & Power Market in Korea. April. 2015

Transcription

1 Dynamics of LNG & Power Market in Korea April. 2015

2 I. Gas and Power Market Structure Korea started importing LNG from 1983 through the establishment of KOGAS, sole wholesaler, importer, and LNG infra operator until Korean government s deregulation policy was introduced in LNG Market Structure (as of 201) LNG Downstream LNG Seller LNG Wholesaler 1 City Gas 18.2Mtpa (9.9%) 2 Power Plant 17.0Mtpa (6.6%) Limited to internal captive use only 3 LNG Direct Importer (SK, Posco, GS) 1.3 Mtpa (3.5%) 1

3 1 City Gas Market Highly matured, hence sluggish growth Sales volume in city gas City gas market share (as of 201) (millions of tons) CAGR : 35.5% CAGR :.% Others 2.2% SK E&S 21.5% Samchuly 15.8% Kyung Dong 12.5% Seoul 8.5% Regional monopoly Sluggish demand growth due to high penetration Natural gas only sourced by wholesaler Regulated tariff system Source : Korea City Gas Association 2

4 2 Power Market - Cost Based Merchant Market Generation ON/OFF is determined daily by KPX (Korea Power Exchange), based on the variable cost (i.e. fuel) Dispatch order based on cost ($/MWh) Power demand Operates on a cost based market mechanism, not PPA LNG KPX plays a key role as a system operator COAL Only at peak demand, the LNG players can be called in NUCLEAR Only the top players with competitive fuel price would stand the chance to be turned on 0h 6h 12h 18h 2h 3

5 2 Power Market - Demand & Supply While power demand growth is slowing down, significant new generation capacity will be introduced in the foreseeable future Deceleration of power demand growth rate Growth rate of power demand 2.2% of growth rate forecasted for next 15 years Slowing economy and maturing power market Acceleration of power generation capacity New Capacity of power plant (unit : GW) 3GW of new capacity (2013 ~ 2019) LNG plant accounts for 36% of total capacity 10.1% Others 10.1 LNG 6.5%.9% 5.7%.5%.7% Avg. 6% Coal Nuclear % 2.5% 1.6% 0.6% Source : Ministry of Commerce, Industry & Energy the 6th Power Supply & Demand Plan (Feb. 2013)

6 2 Power Market - Impact to LNG Power Plant With the influx of new capacity, especially the low cost nuclear and coal, LNG powered generation could be less operational Power demand by fuel source 29% Max. Demand Nuclear, Coal, Renewable CHP + LNG Oil 33% 32% % Power reserve rate 7.6% 32% Power Reserve Rate 77 3% % 5 16% Utilization ratio of LNG power plants LNG volume consumed by power plants 53% 30% 18mtpa 8mtpa Source : Ministry of Commerce, Industry & Energy the 6th Power Supply & Demand Plan (2013), Major Electric Power Statistics (2013), Report for Power System 201 (KPX) 5

7 3 New entrants in Korean LNG Market LNG direct importers, newly entered the market by the deregulation, are facing several challenges Historical changes Challenges to LNG direct importers 1999 Government announced the gas industry reform for deregulating LNG import business 2006 First direct LNG import by private company, SK E&S, Posco 201 Companies importing LNG directly Uncertainty of power market Securing own receiving terminal capacity 2020 (E) Companies securing LNG Disposal of excess LNG volume Source : LNG Japan Corporation, GIIGNL, MOTIE 6

8 II. SK E&S LNG Business SK E&S is building LNG value chain to enhance competitiveness for its downstream business E&P Conventional (Australia offshore) Unconventional (US Shale Gas) Liquefaction Freeport LNG Tolling Agreement (2.2 Mtpa) Upstream 3 rd Party SPA Indonesia Tangguh Chevron Portfolio Terminal Shipping Boryeong LNG Terminal US Freeport Australia Midstream Power Plant LNG Power CHP Retail City Gas: Mtpa LNG to 3.3 million households Downstream 7

9 III. Expectation to LNG Market LNG Price Korean Buyer s preference has shifted Security Economics Call for flexibility on LNG pricing scheme Destination Global trend to relax and abolish destination clauses in LNG contract Relaxation of destination clauses was agreed by G7 and APEC Volume Need more flexibility on contracted volume in order to resolve excess volume and cope with power market uncertainty 8

10 Thank You