Gas Buyers Poised to Commit on South Korea Atomic Shift: Energy
2013-10-16 09:20:51.286 GMT
By Jacob Adelman and James Paton
Oct. 16 (Bloomberg) -- South Korea’s plan to almost halve
its use of atomic power will prompt the world’s second-largest
buyer of liquefied natural gas to sign new supply deals for the
fuel, according to Woodside Petroleum Ltd.
The shift away from nuclear in Korea will give buyers such
as Korea Gas Corp. confidence to commit to gas to comply with
government policies, said Peter Coleman, the chief executive
officer of Woodside, Australia’s second-largest oil and gas
producer. The company plans to decide in mid-2015 whether to
proceed with its Browse project that would liquefy gas on a ship
offshore Australia for delivery by vessel.
“There’s such a long lead time on this stuff that the
earlier you can get clear policy direction, the earlier that the
buyers -- whether it be Kogas or others -- are able to act,”
Coleman said in an interview yesterday at an industry conference
in Daegu, South Korea. “If buyers are not willing to make those
commitments, then projects won’t get built. People don’t build
LNG projects on spec.”
At the weekend, South Korea, which imports all its energy,
proposed scaling back nuclear power to 22 percent to 29 percent
of its energy mix by 2035 from a previous target of 41 percent.
That follows public concern about safety after the Fukushima
nuclear disaster in Japan and a scandal in the industry at home.
On Oct. 11, the government said it would indict 100
officials on corruption and bribery charges after a probe into
the nuclear industry found widespread use of faked safety
documents for components.
LNG Winner
The pullback from nuclear will be decided this year pending
public feedback and Cabinet approval. Atomic energy accounted
for 26 percent of power generation capacity as of the end of
2012, according to the energy ministry.
“The new long-term energy policy is heavily focused on
expanding the use of LNG,” Jang Gil Soo, a special adviser for
Korea Electric Power Corp., the country’s monopoly electricity
distributor, said at the conference. “It doesn’t have any
restrictions, like coal, which creates environmental problems.”
Taiwan is another Asian country rethinking nuclear. The
island is building its fourth atomic plant, but the fate of the
project may go to a public vote after leaks were found in used
fuel pools of another station. President Ma Ying-jeou has said
atomic energy will be abandoned as soon as economically and
environmentally viable alternatives are found.
Play the trend
“This is part of a trend we’re seeing in Japan, Taiwan and
now South Korea,” Neil Beveridge, a Hong Kong-based analyst at
Sanford C. Bernstein & Co., said yesterday by phone. “We are
seeing certainly a slowdown in plans for nuclear expansion, and
LNG remains the beneficiary of this trend.”
Woodside will probably seek to sell LNG from its Browse
project to South Korea, Beveridge said. With PetroChina Co.,
Mitsubishi Corp. and Mitsui & Co. partners in Browse, China and
Japan will likely be “anchor” customers, he said.
Liquefying gas from the Browse field on giant vessels
offshore will cost an estimated $46 billion over the life of the
project, compared with about $70 billion for an onshore plant,
Citigroup Inc. said last month.
“We are developing a technology base that is broad enough
to be able to develop LNG in a number of different ways, not
just the traditional onshore plant way,” Coleman said.
Big Ships
Samsung Heavy Industries Co. will probably build the three
floating LNG plants for the Browse project, according to a Sept.
23 report from Goldman Sachs Group Inc. Samsung Heavy is now
building its first floating LNG plant to tap Shell’s Prelude gas
field in Australia.
Korea Gas owns a stake in Prelude and is a partner in
Santos Ltd.’s $18.5 billion LNG project on Australia’s east
coast that’s scheduled to start exports in 2015.
Driven by Asia, the outlook for LNG demand remains strong,
with customers needing contracts for another 70 million tons a
year by 2020 and 180 million tons by 2025, Goldman Sachs said in
its Sept. 23 report.
The shift to gas from nuclear still leaves a place for
atomic power, said Toshiba Corp. Vice Chairman Norio Sasaki in
an interview in Tokyo.
“Nuclear power has a role as a cleaner energy,” he said.
“Gas prices cannot be kept at low levels based on the latent
demand in emerging economies.”
The company is building four nuclear plants in China and
another four in the U.S. and targets 31 more orders by March
2018, said Sasaki, 64, who was CEO of Toshiba Power Systems Co.
in 2006 when it bought Westinghouse Electric Co.
Still, with Japan moving to a lower nuclear percentage in
overall energy demand and South Korea following, that’s a supply
gap for gas, Royal Dutch Shell Plc Chief Executive Officer Peter
Voser said at a press conference in South Korea.
“In the shorter term it’s probably gas that will fill
that,” Voser said. “In the longer term it’s probably a
combination of renewables and gas.”
