KOGAS cuts import costs on Qatari LNG with COVID-19 kits

Korea Gas Corp. (KOGAS) cut imports costs on liquefied natural gas (LNG) from Qatar for 20 years thanks to COVID-19 test kits.

KOGAS signed on July 12 a deal with Qatar Petroleum (QP) to buy 2 million tons of LNG a year from 2025 to 2044 at prices that are 34% lower than previous purchase contracts. The latest deal will help KOGAS reduce LNG imports costs by more than $1 billion in the 20 years, according to the importer.

The agreement also allows the South Korea’s state-run company to negotiating with other major LNG suppliers on cuts in prices for about 13 million tons, a KOGAS source said.

“Qatar is a market dominant player, producing 100 million tons of LNG a year,” said the source. “The friendly relationship with Qatar is helping talks on prices with other countries.

KOGAS was able to secure the good deal with Qatar due to South Korea’s COVID-19 detection kits. Saad Sherida Al-Kaabi, the Minister of State for Energy Affairs and QP’s Chief Executive Officer (CEO), made a phone call to KOGAS’ President & CEO Chae Hee-Bong in March 2020 to ask help on the kits as the Middle East country faced difficulties to secure the devices with the pandemic quickly spreading, according to the industry sources.

In response, Chae mobilized all of his networks to secure the diagnostic kits. He sought help from the Ministry of Trade, Industry and Energy and Korea Biotechnology Industry Organization (KoreaBIO) to find a proper kit supplier – Bioneer Corp. He checked quality of the company’s COVID-19 test kits and possibility of supply to Qatar. As a results, Qatar bought the kits for about 5 billion won ($4.3 million). Al-Kaabi was known to have expressed his gratitude to Chae saying he wants to become a reliable friend who can help in difficult times.

The help bore fruit when KOGAS was in talks with QP earlier this year to adjust prices of LNG purchases in a long-term contract signed in 2019. QP officials refused to cut prices, saying “no reasons for discounts.”

But Al-Kaabi approved a 34% cut after Chae explained to him the impact of LNG price hikes on South Korean economy and proposed potential cooperation between the two companies.

Write to Ji-Hoon Lee at lizi@hankyung.com
Jongwoo Cheon edited this article.