Seoul grapples to cap fuel price spike upon LNG price jump

[Provided by Ministry of Oceans and Fisheries]

South Korea may have to cap the rise in wholesale utility prices as liquefied natural gas (LNG) import prices already hovering at record levels are bound to head higher in colder weather due to increased demand from the world’s two most populated countries of China and India.

According to the fourth quarter natural gas market report by the International Energy Agency (IEA) on Sunday, Asian spot LNG prices spiked to its record high of above $45 per MMBtu on average in the third quarter after gaining more than 70 percent from a quarter ago.

The IEA also forecast that LNG demand from China and India next year will grow by 5 percent and 2 percent, respectively, stoking concerns that LNG import prices would further soar.

Unit prices of LNG imports in Korea already hit a historic high of $1,465.16 per ton in September, surging 22.2 percent on month and 156.5 percent on year. This is the highest figure since the Korea Customs Service started compiling export and import data in 2000.

Upon a series of reports expecting LNG import price increases, the Korean government is working to cap steep rises in the system marginal price (SMP), which is the cost that state utility KEPCO pays for electricity to public and private power generating companies. Gas prices correlate with the rises in the SMP.

By Lee Jin-han, Park Dong-hwan and Lee Ha-yeon