Korea likely to face LNG price volatility due to suspended supply from Qatar: officials

A plastic manufacturing facility is closed in Ansan, Gyeonggi Province, Tuesday, due to supply disruption issues stemming from the Mideast crisis. Yonhap

Seoul may see increased volatility in liquefied natural gas (LNG) prices after Qatar reportedly declared force majeure on its long-term LNG supply contract with South Korea, but the impact on the supply will likely be limited, officials here said Wednesday.

"We have already excluded (LNG) shipments from Qatar from our calculation for this year's (LNG supplies)," Yang Ghi-wuk, deputy minister for trade, industry and resource security, said in a daily briefing on resources supplies amid the Mideast crisis, stressing that the country has sufficient LNG supplies to last throughout this year, even excluding shipments from Qatar.

Yang added the government has been working to secure gas supplies through alternative routes as Qatar's announcement of force majeure had been expected, though Seoul has yet to receive official confirmation from the Middle Eastern nation.

Later in the day, a Cheong Wa Dae official confirmed the "stable supply of LNG," noting that supply routes outside the Middle East "remain stable."

The official reiterated the ministry's stance that nothing has been officially confirmed regarding Qatar, adding the government's on-going contingency efforts had already anticipated potential supply disruptions from the Middle Eastern nation.

"Even if LNG supply from Qatar is suspended, we can ensure stable supply until the year's end, as imports from non-Middle Eastern regions are proceeding smoothly," the official said.

Despite sufficient supplies, the volatility of LNG prices could go up, putting upward pressure on domestic electricity rates, the ministry official noted, highlighting ongoing cooperation with climate and other related ministries to respond to the matter. The climate ministry on Tuesday announced its plan to reduce LNG consumption by increasing coal and nuclear power generation.

Yang's remarks came hours after foreign news outlets, including Reuters and Al Jazeera, reported that QatarEnergy, a state-owned energy firm, declared force majeure on its long-term LNG supply contracts with South Korea, China, Italy and Belgium due to damage caused by last week's missile attacks on its facilities amid an ongoing war led by the U.S. and Israel against Iran.

Yang said the government is also closely monitoring supply issues of other industrial and everyday products, such as engine oil, paints and garbage bags, noting that unexpected supply disruptions may arise in different sectors.

Regarding the possibility of oil imports from Russia, Seoul has confirmed with the U.S. government that purchases of Russian crude and petroleum products are allowed through the U.S. dollar, Chinese yuan, Russian ruble and United Arab Emirates dirham, the deputy minister said.

The U.S. recently issued temporary waivers allowing purchase of Russian crude already at sea as part of efforts to stabilize surging global oil prices sparked by the Mideast crisis.

Washington also confirmed there would be no secondary sanctions on such transactions, he explained, noting that the Seoul government is sharing the news with private industries.

Yang said, however, many uncertainties remain for imports of Russian crude, including issues surrounding the oil quality and limited time to secure the products.

Imports of Russian naphtha seem more likely, he added.

The Seoul government has temporarily designated naphtha, widely used across petrochemical and other industries, as an economic security item due to a shortage of the material, which the country mainly imports from the Middle East.

It is also preparing to impose export restrictions on naphtha, with an aim to announce such a measure within this week.