LONDON/SEOUL, Feb 22 (Reuters) - Korea Gas Corporation (KOGAS) has redirected cargoes of liquefied natural gas (LNG) from South Korea to northwest Europe this winter for the first time, industry sources told Reuters.
Three KOGAS cargoes from a U.S. LNG offtake deal have been diverted to Britain and France since December, in another sign of how weaker-than-expected Asian LNG demand made Europe a top LNG destination this winter.
KOGAS began taking LNG from U.S. producer Cheniere in 2017 under a 20-year deal for about 3.5 million tonnes from the Sabine Pass plant in the Gulf of Mexico. This is the first winter that KOGAS changed the destination to northwest Europe.
The tight spread between European gas and Asian LNG prices has made it more profitable to send Atlantic-produced LNG to Europe rather than Asia due to the difference in shipping costs.
But the diversion was prompted by a schedule conflict in South Korea’s LNG terminals, an industry source said, rather than a decision taken for commercial profit which South Korean regulations did not allow.
Gas stocks in South Korea, as well as other Asian markets, have been full this winter due to mild weather, prompting a wave of cargo cancellations and diversions from Asia to Europe.
Two KOGAS U.S. cargoes were diverted to Britain’s Isle of Grain terminal, with one to be delivered by the Hyundai Peacepia on Feb. 28. Another cargo on the same vessel arrived at Isle of Grain in December, Refinitiv Eikon data shows.
The vessel is chartered by KOGAS, shipping market sources said.
A third cargo was delivered to France’s Dunkirk terminal in January.
At least one of the three cargoes was supplied to EDF Trading, a unit of French utility EDF, in an agreement between the companies signed in 2015, one source said.
This deal allows KOGAS to hand over up to 4 million tonnes (mt) of LNG to EDF Trading over eight years from 2017.
South Korea’s LNG imports in December to February have dropped by more than 7 percent compared to the same period last year, Refinitiv Eikon data shows.
KOGAS’ domestic gas sales fell almost 10 percent in January and more than 6 percent in December compared to the same months a year ago, due to weaker demand for power generation and mild winter weather.
Reporting by Ekaterina Kravtsova and Jane Chung Editng by Nina Chestney and Edmund Blair