The elegant young woman in the tailored grey suit slips on industrial gloves. She picks up a canister of freezing liquid. The digital display says -163°C. She slowly pours the liquid into a goldfish bowl. Will the goldfish live or die? And what is this? Some bizarre circus act? No, just another day at the Kogas Gas Science Museum at Incheon, one of the world’s largest LNG import terminals, not far from Seoul. The liquid is LNG and the woman is demonstrating the safety of LNG to an audience of excited kindergarten children.
By the time they reach school Korean children probably know quite a lot about LNG and for good reason because the winters in Korea are very cold and Korea relies on LNG for virtually all its gas supplies.
Not that Korea is far from countries with serious quantities of gas. Russia has the world’s largest gas reserves and it is only around 750 kilometres from Seoul to Vladivostok. Within two years Vladivostok will be linked by gas pipeline to the huge Russian Sakhalin gas field, which has estimated recoverable gas reserves of 80 trillion cubic feet, twice those of Gorgon. A gas pipeline from Russia to Korea would make obvious sense.
The Koreans agree and have made numerous trips to Russia, trying to do a deal. However there are challenges. The obvious route for Russian gas would be via North Korea. However the tensions between North and South prevent this. North Korea continues to pursue its nuclear program and it is now also clear that the South Korean patrol boat sunk on March 10, with a loss of 46 lives, was hit by a North Korean torpedo. No country would want to rely on North Korea for safe transit of its gas supplies.
Another option would be an underwater pipeline off the east coast of Korea. However, at around two kilometres, the water is too deep.
Another option would be via China and the Koreans have also made numerous trips to China. However the Chinese want to secure their own gas supplies and have themselves recently made progress with Russia. This is higher priority than any deal with Korea.
That leaves LNG and Korea is the world’s second largest buyer after Japan. It has a diversified portfolio of supply contracts amounting to around 26 million tonnes per annum (Mtpa) with nine countries . Qatar is the biggest supplier, with 27% of contracted supply. Qatar and Korea have a close relationship. Qatar supplies the gas and Korea built the ships that carry it. The other major suppliers are Malaysia (19%), Indonesia (16%) and Oman (16%).
Australia is currently only a minor supplier, with a 0.5 Mtpa contract with the North West Shelf. Many years ago there was a tiff between the North West Shelf and Korea and for many years selling Australian LNG to Korea was like trying to get Greenpeace to embrace coal.
However that is long ago and the Koreans are clearly taking much more interest in Australia.
Kogas has agreements with Chevron to buy 1.5 Mtpa from the Gorgon LNG project, currently under construction, and 1.95 Mtpa from the proposed Wheatstone project.
Kogas has also been keeping a close eye on coal seam gas (CSG) developments. In the science museum there is a map showing their global upstream interests and it includes the alliance with Queensland CSG company, Blue Energy, announced last year.
Now Kogas is waiting on the Korean Government to approve an offtake agreement with the Petronas-Santos GLNG project at Gladstone.
If this agreement goes ahead this would be a further vote of confidence in CSG-based LNG. It has been a tough journey trying to get established LNG buyers to sign up for the Queensland projects but they are coming around. QGC has deals with Tokyo Gas and CNOOC, both established buyers, and a GLNG deal with Kogas would be a further vote of confidence.
Incidentally, the goldfish lived. For them it was just another day in the goldfish bowl and, for a goldfish, working at the Kogas Museum is a pretty good gig.
This piece was originally published on afr.com, Resources Daily.