Korea Midland Power has struck a USD 3.4 billion deal with Switzerland’s Vitol SA to buy liquefied natural gas under a long-term contract.
The deal marks the first successful attempt by a Kepco unit at buying LNG directly from suppliers instead of purchasing through the country’s LNG supplier, Korea Gas Corp.
The power-generating unit of Korea Electric Power Corp, known as Komipo, will buy 400,000 metric tons of LNG a year from Vitol from 2015 to 2024.
The deal with Vitol comes with an option for Komipo to purchase more than the initially contracted volume, depending on changes in market prices.
As Komipo doesn’t have a LNG terminal, it will use Posco’s terminal. South Korea has four LNG terminals in operation, of which Kogas runs three. Kogas also has a terminal in construction, with four tanks to be built by 2014.
The government has allowed companies to import LNG for their own consumption since 2001, but Kepco’s power generation units, including Komipo, have been unable to find a supplier.
Only SK E&S, an affiliate of SK Group, Posco and GS Caltex buy LNG directly from overseas suppliers. Local companies other than Kogas are still not allowed to import LNG for trading purposes.