Hanan Signs Supply and Purchase Agreement
Affordable and Stable Natural Gas Secured
Even for Small Power Producers Facing Import Difficulties
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 of last month. 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] Korea Gas Corporation has achieved its first success related to the individual pricing system, which it is prioritizing. Gas Corporation plans to fully implement the individual pricing system for new power generators or generators that have completed sales transactions with the Gas Corporation from January 1, 2022.
According to Gas Corporation on the 3rd, it signed the "Agreement on Supply and Acceptance of Individual Pricing System for Power Generation" with Korea District Heating Corporation (District Heating Corporation, Hanhan) at the Intercontinental Seoul COEX on the 30th of last month.
From 2023, Gas Corporation will supply a fixed annual volume of 400,000 tons of natural gas for about 15 years to three new combined heat and power plants located in Yangsan, Gyeongnam; Daegu; and Gyeongju, Gyeongbuk.
About 20 officials from both companies, including Cha Heebong, President of Gas Corporation, and Hwang Changhwa, President of Hanhan, agreed on key supply conditions such as volume and duration, and decided to discuss detailed matters in the next stage, the main contract (sales contract).
The individual pricing system is a scheme that links liquefied natural gas (LNG) import contracts individually to each power generator, expanding the choices for power companies. This differs from the existing average pricing system, which averages all LNG import contract prices signed by Gas Corporation and supplies them at the same price to all power companies.
Gas Corporation cited supply stability through its know-how and global networking, as well as price competitiveness, as reasons why Hanhan chose the individual pricing system.
Based on the contract with Hanhan, Gas Corporation plans to lead the domestic natural gas market by flexibly and actively reflecting the rapidly changing global LNG market trends through the individual pricing system.
Leveraging Gas Corporation’s strengths such as ▲low LNG import prices ▲various contract options ▲stable supply and procurement through years of experience ▲possession of the largest domestic storage, vaporization, and transmission facilities, it plans to meet the demands of power companies.
Under the individual pricing system, not only large-scale operators like Hanhan but also small and medium-sized power companies that find it difficult to import LNG directly will be able to secure affordable natural gas stably.
This is because, unlike the average pricing system, power producers can sign LNG supply contracts tailored to the conditions of their own generators. Gas Corporation expects that the introduction of the individual pricing system will enable small-scale power producers to have excellent generation cost competitiveness in the electricity market.
President Cha stated, "With the signing of this agreement, the market competitiveness of Gas Corporation’s individual pricing system has been proven," and expressed his ambition, saying, "In the paradigm shift toward eco-friendly energy, we will accelerate attracting the individual pricing system to meet the sharply increasing demand for natural gas."
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