SEOUL: South Korean state-owned Korea Gas Corp.’s LNG imports edged up 0.5% year on year in the first-quarter, as demand climbed 1% on a cold snap. Kogas, the world’s biggest LNG buyer, imported 9.82 million mt over January-March 2016, up from 9.77 million mt a year earlier, a company official said Thursday. It marks the first year-on-year quarterly increase since first-quarter 2014 when Kogas’ LNG imports rose 0.5% to 12.61 million mt.
Kogas has reduced its LNG intake due to weak demand amid an economic slowdown and mild temperatures, as well as greater use of coal and nuclear for power generation. The company’s LNG imports fell 13.5% year on year to 31.41 million mt in 2015, from 36.33 million mt in 2014, marking the second consecutive year of annual decline in LNG imports. The state utility said most of the LNG was imported under 15 long-term contracts and one medium-term contract.
Kogas has term contracts for 11.02 million mt/year from Qatar; 4 million mt/year from Malaysia; 4 million mt/year from Oman; 3.5 million mt/year from Australia; 1.7 million mt/year from Indonesia; 1.5 million mt/year from Russia’s Sakhalin and 1 million mt/year from Brunei, among others, the company said.
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 2027 term contracts for 23.5 million mt, or 62.3%, of the 37.7 million mt it expects to need that year. The state company, which has a monopoly on domestic natural gas sales, sold 10.79 million mt of LNG for the first quarter, up 1% from 10.68 million mt in the year-ago period. Kogas sold a total 31.46 million mt of LNG last year, down 10.6% from 35.17 million mt in 2014, which marks the second consecutive year of decline.
Of the Q1 total, sales to retail gas companies for households and businesses rose 4.2% year on year to 6.69 million mt, from 6.42 million mt in the year-ago period, while sales to power generation companies fell 3.5% to 4.11 million mt, compared with 4.26 million mt a year earlier.
Kogas’ LNG sales may be boosted later this year by retail price cuts. The government lowered retail natural gas prices for households and industry by an average 5.6% from May 1 to reflect reduced LNG import costs. It marked the third cut this year after rates fell 9% in January and 9.5% in March. South Korea cut city gas rates more than 20% last year — a 10.3% cut in May, 10% in March and 5.9% in January. In September last year, rates were increased by 4.4%.
Due to the retail price cuts, Kogas’ sales revenue dropped 23.9% year on year to Won 7.77 trillion ($6.67 billion) in Q1, from Won 10.21 trillion in the same period last year. Its net profit also fell 12% year on year to Won 511.3 billion, from Won 581.2 billion in the year-ago period. But operating profit climbed 3.3% year on year to record Won 894.1 billion in Q1, compared with Won 865.4 billion a year earlier.
The record operating profit in Q1 was largely driven by cost-saving efforts, the company said in a statement. Kogas also saw its debt decrease to Won 31.29 trillion as of end-March from Won 32.33 trillion in end-2015. Its debt-to-equity ratio fell to 297.5% at end-May from 321.5% in end 2015.
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. Kogas is currently involved in 26 overseas projects in 13 countries, including 10 under development and production and five at the exploration stage.
