Industry Trend Analysis - Favourable Policy To Drive Steady LNG Growth - DEC 2017

BMI View: South Korea ' s LNG imports will see sequential gains over the coming years, supported by government efforts to boost the share of natural gas and renewables in the overall power generation mix, as part of a broader move to reduce air pollution and improve energy security.

South Korea's LNG imports will see consistent growth over the coming years, supported by President Moon Jae-In's efforts to phase out nuclear and coal-fired electricity generation in favour of natural gas and renewable energy. Since taking office in May 2016, Moon has acted swiftly to stamp his mark in the domestic energy space, temporarily shutting down 10 aging coal-fired power plants across the nation (equivalent to 10.6% of total coal power capacity in Korea), while allowing the country's oldest nuclear power plant, the 587.0MW Kori-1 plant in Busan, to retire. Tellingly, Korea's monthly LNG imports have averaged y-o-y growth of 15.0% in the 16 months under the Moon administration, compared to an average decline of 8.0% in the months prior.

Moon's anti-nuclear stance experienced a minor setback recently, after a state commission recommended Seoul to restart construction of two nuclear reactors, the Kori 5 and 6, based on a public opinion survey held in October (s ee ' Quick View: Public Survey Blow To Moon ' s Nuclear Phase-Out ' , October 20). However, we do not believe this will significantly alter Moon's hard-line, assertive stance on phasing-out nuclear and coal over the longer run, and continue to expect nuclear projects in the proposed and planning phases to see little progress in the coming years. In fact, a draft energy policy published in the same month only reinforced the government's target to increase the share of natural gas in the broader energy mix from 22.0% currently to 37.0% by 2030 (and renewables from 7% to 20%) at the expense of coal and nuclear.

LNG Imports Benefitting From Supportive Policy
South Korea - Monthly LNG Imports, mn tonnes (LHS) & % chg y-o-y (RHS)
Source: Korea Customs, BMI

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