South Korea’s LNG Deal Will Deliver Huge Benefits to US

FractivistsK.J. Rodgers
Crownsville, Maryland  

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South Korea and the U.S. came to a 20-year agreement on LNG Exports. This partnership is leading to much more than just gas. 

Korea has been in the news a lot recently. Often times we are hearing horrible stories about the despicable acts of the North and their relentless agitation towards the South. However, our relationship with Korea on the trade side has seemed a bit one-sided: until now.

South Korea has come a long way on the global markets. Samsung, Hyundai, and LG have made their marks in the U.S. These consumer products have caused quite the trade deficit as we have been importing way more than exporting to the peninsula in recent years.  This deficit is scrutinized as it tends to favor South Korea. Late last month, Korea and the United States came to a new deal based around the latest U.S. export that so many are craving; liquefied natural gas.

South Korea's KoGas

In May, South Korea’s President, Moon Jae-in was elected and decided that they would transition away from coal and nuclear energy by pushing forward on a deal signed in 2012. Now, the state-owned gas supplier, KOGAS, has commenced a 20-year agreement to supply 3.5 million tons of LNG to South Korea from the Sabine Pass Liquefaction facility in Louisiana. This is more than 10% of South Korea’s annual demand. The Trump administration estimates this deal to be near $25 billion.

Asia is a currently the hotbed for LNG imports. We discussed recently how China’s long-term agreement was good for both countries, as well as the environment.  Japan, also, has been receiving U.S. LNG imports, so it makes good sense South Korea should be next as they are the 3rd largest buyer of natural gas. By supplying 10% of the world’s 3rd largest LNG market and combining with a number of other countries we are now supplying, you could say the U.S. is now (or close to being) a net exporter.

Just like watching an infomercial we can say, “but wait, there’s more!” A lot more actually as South Korea is in talks with Cheniere Energy to develop more capacity. Currently, there are several trains, not rail trains, but liquefaction trains, at Sabine Pass. Cheniere has permits for two additional trains that have yet to be commercialized and Korea may help take that on.KoGas CEO, Seung-Hun Lee said:

“There is a strong possibility, But at this moment we are just talking about the possibility. What is sure is we are taking gas now from train 3 at Sabine Pass.”

Sabine Pass Liquefaction Trains

Korea has also come to a couple of more agreements with Continental Resources Inc., (CLR) and General Electric, (GE). The agreements are for South Korea-based SK Group to invest $1.6 Billion in domestic gas projects from Alaska to Oklahoma. CLR CEO Harold Hamm said,

“By 2019 the United States will expand our exports 500%. In the U.S. we are currently exporting 2.5 Bcf and will increase to 11 Bcf by 2019. If we keep permits coming through on facilities, we can grow that amountof gas around the globe to 30 Bcf by 2025, 2030. This creates jobs and opportunity for everybody.”

But wait, there’s even more! I mentioned the trade deficit that we have with Korea, along with the natural gas agreements, but we have been able to tie into other industries as well. Samsung plans to spend $380 million on a factory in South Carolina and another $1.5 billion on a Texas semiconductor plant. LG is earmarking a $250 million plant in Tennessee and $300 million on a facility in New Jersey. This is all on top of the call to lifting barriers to U.S. auto sales in South Korea.

What we have been able to do here is two-fold. Natural gas has paved the way for initial jobs and economic impacts at the source of the development. It was used to create a supersized bargaining chip that brought more jobs back in manufacturing in several areas – all while decreasing the trade deficit. This is terrific news and I expect other deals to follow suit.

The post South Korea’s LNG Deal Will Deliver Huge Benefits to US appeared first on Natural Gas Now.

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