As the conflict in the Middle East continues, South Korea's imports of liquefied natural gas (LNG) from the region have dropped by more than 66% this year, while imports from North America have more than doubled. This shift in LNG import patterns comes as the U.S. pressures South Korea to participate in Alaska's LNG development project, deepening the government's concerns.
According to statistics from the Korea International Trade Association, South Korea's LNG imports from January to September totaled 32.87 million tons, a 6.4% decrease compared to the same period last year.
By region, imports from the Middle East fell to 2.42 million tons, a decline of 66.2%. Imports from South America and Europe also decreased, totaling 1.37 million tons and 1.42 million tons, respectively, down 17.8% and 12.7%.
Notably, imports of LNG from Qatar plummeted to 1.7 million tons, a 68.6% drop. There were no imports during the periods of April to June and August to September. Qatar was South Korea's third-largest LNG supplier last year, following Australia and Malaysia, but the ongoing conflict has disrupted supply.
In contrast, imports from North America surged to 7.82 million tons, a 102.9% increase year-on-year. U.S. LNG imports rose by 41.7% to 4.85 million tons, while Canadian imports skyrocketed by 587.6% to 2.97 million tons.
The South Korean government has proactively secured alternative supplies from the U.S. and Southeast Asia in response to the disruptions in Middle Eastern LNG supplies. However, uncertainty remains regarding the timeline for global supply normalization, and increased demand during the winter season is expected to exacerbate supply uncertainties. This competition for securing supplies is also putting upward pressure on international prices.
According to the Korea Energy Economics Institute, the price index for LNG in East Asia, known as JKM, rose by 15.2% in August to $22.00 per MMBtu (million British thermal units). The European gas price index, TTF, also increased by 17.1% to $21.20 per MMBtu.
The government plans to diversify its import sources and increase the proportion of long-term contracts to create a stable supply environment in response to international price volatility.
Amid these developments, the strategic value of the U.S. Alaska LNG project is becoming more prominent. Kim Jeong-kwan, Minister of Trade, Industry and Energy, stated during a National Assembly audit on October 6 that the ongoing conflict in the Middle East has clearly created new strategic value for the Alaska project.
Minister Kim explained that difficulties in importing LNG from the Middle East have arisen, and shipments from the Gulf are being rerouted due to disruptions in transit through the Panama Canal.
While the government has not yet confirmed its investment in the Alaska project, it has maintained that it cannot invest without commercial viability. However, the strategic value of energy supply chains has become more apparent since the onset of the Middle East conflict, suggesting that participation in the project may be reconsidered.
Nonetheless, ensuring the project's economic viability remains a challenge. The Alaska project has raised concerns due to its massive investment costs and uncertain profitability.
Earlier, Reuters reported that the local lead agency for the Alaska LNG project estimated the project costs to be between $44.5 billion and $54.5 billion. Considering the annual production capacity, the cost per million tons is projected to be between $2.2 billion and $2.7 billion, the highest among proposed U.S. LNG export projects to date.
Delays in permits and labor shortages have also been identified as obstacles to advancing the project.
According to a specialist researcher at the Korea Institute of Industrial Technology, while there is strategic value in supplying LNG from Alaska to South Korea via the Pacific, the economic value is a separate issue. He added that it is essential to evaluate how much infrastructure costs can be offset and how to secure rights of first refusal or supply conditions during investment.
The South Korean government is reportedly continuing discussions with the U.S. on ways to enhance the project's commercial viability, including potential relief from property tax burdens.
An official from the Ministry of Trade, Industry and Energy stated, "We are maintaining ongoing communication with the U.S. side," but added, "It is difficult to disclose the details of the negotiations."
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.