SEOUL: Korea Gas Corp (KOGAS) has swapped a combined 120,000 tonnes from two liquefied natural gas (LNG) cargoes with Taiwan's CPC Corp , expecting oversupply during off-season, a source at South Korea's state-run gas company said.
Under this deal, which often occurs at off season, CPC receives those two cargoes initially destined to KOGAS from Malaysia's Petronas LNG this month, said the source who declined to be identified as he was not authorised to speak to media.
KOGAS will get paid back by receiving those two cargoes originally destined to CPC in October from Petronas LNG, as winter is South Korea's peak season for heating, he said on Tuesday.
According to traders in London, KOGAS have arranged to swap out several summer LNG cargoes with CPC who will return some of these cargoes during winter to KOGAS as it is over-supplied by around 30 cargoes this summer.
"We swapped two cargoes with Taiwanese firm as we expect gas may run over the storage capacity in summer. We had initially considered 30 cargoes of swaps but thanks to suppliers' cooperation we managed to reschedule shipments to receive them in winter," the KOGAS source told Reuters by phone on Tuesday.
He noted Petronas LNG supplies natural gas to both CPC and KOGAS under their term contracts.
"Summer is extremely off season due to warm weather. Gas demand drops sharply," the source said, noting KOGAS currently has 80 percent of gas in its storage tanks with a total of 4 million tonnes of storage capacity.
Spokesmen at KOGAS and Petronas LNG were not immediately available to comment.
A CPC spokesman said: "These kinds of swaps are fairly common. During the Japan earthquake of a few years ago when their electricity demand spiked we engaged in similar swaps. But with regards to this specific case, we cannot provide any details."
OFF SEASON
Mild weather and high inventory levels in Japan and South Korea, the world's top two LNG importers, as well as in Europe, have kept a lid on demand for the fuel so far this summer.
That has created a glut in supplies, spurring one of the sharpest downturns on record. Asian spot prices have dropped around 40 percent from a late-winter February peak above $20 per million British thermal units (mmBtu).
Demand usually rebounds strongly in the winter, but unlike oil, LNG is normally only stored for short periods because it evaporates over time.
KOGAS, the world's largest corporate buyer of LNG, is on track to complete construction of three new LNG storage tanks by end-July for its upcoming fourth import terminal, a company spokesman said earlier this month.
Domestic gas sales in South Korea fell 14.5 percent in May from the same period last year when gas demand even in the off season was firm due to a lack of nuclear energy and some closures.- Reuters
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