15-Year Supply of 400,000 Tons of Natural Gas Annually Starting 2023... "The Dawn of Individual Pricing"
Korea Gas Corporation signed the "Agreement on Supply and Acceptance of Individual Tariff System for Power Generation" with Korea District Heating Corporation (KDHC) on the 30th. President Chae Hee-bong of Korea Gas Corporation (right) and President Hwang Chang-hwa of KDHC pose for a commemorative photo after the signing ceremony. (Photo by Korea Gas Corporation)
[Asia Economy Reporter Moon Chaeseok] The individual tariff system, a key initiative promoted by Korea Gas Corporation, has officially entered its full-scale phase.
On the 30th, Korea Gas Corporation announced that it signed a 'Power Generation Individual Tariff Supply and Acceptance Agreement' with Korea District Heating Corporation (District Heating Corporation, Hanhan) at the InterContinental Seoul COEX.
For the next approximately 15 years, it will supply a fixed annual volume of 400,000 tons of natural gas to three new combined heat and power plants located in Yangsan, Gyeongnam; Daegu; and Gyeongju, Gyeongbuk.
The event was attended by about 20 officials from both companies, including Cha Heebong, President of Korea Gas Corporation, and Hwang Changhwa, President of Hanhan, who agreed on key supply conditions such as volume and duration, and decided to discuss details in the next stage of the main contract (sales contract).
The individual tariff system links LNG import contracts individually to each power generator, expanding the choices available to power producers. This differs from the existing average tariff system. Under the average tariff system, Korea Gas Corporation supplied all power producers at the same price, which was the average price of all LNG import contracts concluded by the corporation.
Despite the recent decline in international liquefied natural gas (LNG) prices and deregulation leading to increased direct LNG imports, Hanhan's choice of the individual tariff system is evaluated to have been significantly influenced by Korea Gas Corporation’s long-standing expertise, supply stability through global networking, and price competitiveness.
Korea Gas Corporation plans to lead the domestic natural gas market by flexibly and proactively reflecting the rapidly changing global LNG market trends through the individual tariff system.
At the same time, it plans to leverage its unique strengths such as ▲low LNG import prices ▲various contract options ▲stable supply and procurement based on years of experience ▲possession of the largest domestic storage, vaporization, and transmission facilities to meet the diverse demands of power producers.
In particular, not only large-scale operators like Hanhan but also small and medium-sized power producers who find it difficult to import LNG directly will be able to secure affordable natural gas stably through the individual tariff system. This is expected to provide excellent competitiveness in power generation costs in the electricity market.
President Cha said, "With the signing of this agreement, we have proven the market competitiveness of Korea Gas Corporation’s individual tariff system," adding, "In the era of a paradigm shift centered on eco-friendly energy, we will accelerate efforts to attract the individual tariff system in response to the sharply increasing demand for natural gas."
It is known that Korea Gas Corporation is participating in negotiations and bids with power producers for a volume exceeding approximately 3.5 million tons in addition to the contracted volume with Hanhan.
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