Increasing Mandatory Natural Gas Reserves: "A Measure to Prepare for Extreme Cold Waves and Rising LNG Power Generation"

'Gas Business Act' Enforcement Decree Amendment Approved at Cabinet Meeting
Exclusion of Unusable Stock from Natural Gas Reserve Obligation Calculation

[Asia Economy, Reporter Joo Sang-don] The government has decided to increase the actual reserves of natural gas in preparation for the surge in demand due to the severe cold wave and the increase in liquefied natural gas (LNG) power generation.

The Ministry of Trade, Industry and Energy announced that the partial amendment to the 'Gas Business Act Enforcement Decree' containing this content was approved at the Cabinet meeting on the 24th (Tuesday) and is scheduled to take effect on the 31st.

Until now, Korea Gas Corporation, a gas wholesale business operator, has stocked natural gas including unusable stock (dead stock) that cannot be actually used when calculating the natural gas reserve obligation. The unusable stock is the LNG inventory level that must be maintained at all times for the stable management of LNG storage tanks and cannot be actually used. The unusable stock is typically about 5% of the storage tank capacity, totaling approximately 250,000 tons.

According to the Ministry of Trade, Industry and Energy, the average daily sales volume during the winter season (October to March), when LNG consumption is high, was 116,000 tons in 2019-2020. Considering this, the reserve obligation was 812,000 tons, equivalent to seven days of daily sales. However, this includes 250,000 tons of unusable stock, so the actual usable LNG is only 562,000 tons.

Accordingly, the amendment requires that the reserve obligation be calculated based on the actual available quantity excluding the unusable stock. Under the winter standard, a mandatory reserve of 1,062,000 tons, which is 812,000 tons plus 250,000 tons of unusable stock, must be maintained.

An official from the Ministry of Trade, Industry and Energy said, "It is expected that the effectiveness of the natural gas reserve system will be enhanced by revising the method of calculating the reserve obligation, strengthening the ability to respond to natural gas supply and demand crises such as sudden demand increases due to severe cold waves and unexpected supply shortages caused by import disruptions."