"South Korea Must Import 200 Million Tons of LNG from US... Energy Security Landscape to Change [Digging Energy]"

$23.2 Billion in Energy Imported from the US Last Year
Actual Increase in Imports Expected to Be Limited
LNG Imports to Shift from Australia and the Middle East to the US
Stockpiling of American Light Crude Oil Likely to Expand

The government has agreed, during tariff negotiations with the United States, to import $100 billion (approximately 140 trillion won) worth of American energy over the next four years, which coincides with President Donald Trump's term. This is expected to bring changes to the domestic energy security landscape. In particular, it is anticipated that South Korea's dependence on liquefied natural gas (LNG) imports, which has been centered on Australia and the Middle East, will shift toward the United States.

According to the Ministry of Trade, Industry and Energy and the Korea International Trade Association on August 1, last year South Korea imported $14.2 billion of crude oil, $4.5 billion of liquefied petroleum gas (LPG), $3.1 billion of natural gas, $800 million of petroleum products, and $600 million of coal from the United States, totaling $23.2 billion in energy imports.

Given that South Korea is required to import $100 billion worth of energy from the United States over four years (an average of $25 billion per year), the actual additional amount that South Korea needs to import is estimated to be around $2 billion (approximately 2.8 trillion won). In reality, the additional burden is not significant. The Korean government plans to discuss specific ways to expand imports through further negotiations with the United States in the future.

Additional energy imports from the United States are expected to focus on LNG. President Trump stated on social networking services (SNS) immediately after the tariff negotiations, "We have agreed to invest a large amount of money, such as purchasing $100 billion worth of LNG or other energy products."

Crude oil imports are largely handled by private companies, making it difficult for the government to control import volumes. For LPG, North America already accounts for 90% of imports, so there is little room to increase imports further. Coal demand is gradually decreasing. In contrast, with LNG, Korea Gas Corporation accounted for 74% of imports last year, giving the government significant room for involvement.

According to the Korea Energy Economics Institute, last year South Korea imported 46.318 million tons of natural gas, most of which was in the form of LNG. Australia accounted for the largest share at 24.6%, followed by Qatar at 19.2% and Malaysia at 13.2%. Imports from the United States amounted to 5.636 million tons, accounting for 12.7% of the total.

The government is considering increasing imports of American LNG by redirecting some of the LNG currently imported from Australia and the Middle East to the United States. On the previous day, Kim Yongbeom, Chief Presidential Secretary for Policy, explained, "This agreement does not create new demand or anything of that sort," adding, "There will be some change in composition, such as replacing Middle Eastern imports with American imports, but the total amount is within what is typically required for our economy, so there is no difficulty in making these purchases."

Korea Gas Corporation typically imports the required natural gas through long-term purchase contracts and buys additional quantities on the spot market as needed. It is expected that the corporation will switch volumes from expiring long-term contracts to the United States in the future. A Korea Gas Corporation official explained, "From 2032, we will need to newly contract 3 to 5 million tons of natural gas annually."

The Korea Energy Economics Institute estimated that, considering the results of the Korea-US tariff negotiations and the current LNG contract situation, South Korea would need to import 200 million tons of LNG from the United States to meet the $100 billion target. Divided over 10 years, this means importing 20 million tons of LNG from the United States annually.

Given that last year's LNG imports were about 46.31 million tons, nearly half of the imports would be American LNG. To meet this level, a significant portion of the LNG currently imported from Australia, the Middle East, and Asian countries would need to be replaced with American LNG.

Is there any problem if imports of American LNG increase? On this point, Kim Taesik, Associate Research Fellow at the Gas Policy Research Division of the Korea Energy Economics Institute, analyzed, "Even considering transportation costs, importing LNG from the United States does not put South Korea at a disadvantage compared to Middle Eastern imports." An official from the Ministry of Trade, Industry and Energy explained, "Expanding imports of American LNG has the advantage of diversifying import sources and mitigating geopolitical risks."

Imports of American crude oil are also expected to increase to some extent. Korea National Oil Corporation has a storage capacity of about 140 million barrels, of which 100 million barrels are currently stocked. Of this, about 70% is from the Middle East and 20% from the United States.

Earlier this year, Korea National Oil Corporation replaced 6 million barrels of Middle Eastern stockpiled oil with American light crude just in the first half of the year. A corporation official explained, "As private refining companies are increasingly importing American light crude, we are also increasing our stockpiles of American light crude," adding, "There is still spare storage capacity, so there is room to further increase the proportion of American imports."

Meanwhile, the recent tariff negotiations did not include investment or purchase of Alaska LNG. This may be included in future negotiations between the two governments. An official from the Ministry of Trade, Industry and Energy said, "We still do not know the specific details of the Alaska LNG project," adding, "Further discussions are needed."