S Korean Plan Sees Thin Demand Growth to 2031
South Korea’s ministry of trade, industry and energy April 5 released its 13th Long-term Natural Gas Supply plan (13th Plan) for the period 2018 to 2031.
The plan, so far available in Korean only, forecasts an increase in gas demand to 40.49mn metric ton LNG equivalent by 2031, equivalent to an annual increase of 0.8%. It also forecasts that residential gas demand will increase on average by 1.24%/yr, while gas demand growth in power generation will be more sluggish at 0.26%/yr.
Consultancy Wood Mackenzie sees a period of gas demand decline out to 2025 but thinks the 13th Plan is slightly too conservative in its forecast of 2031 gas demand. It says the gas plan acts as a follow-up to the government’s 8th Long-term Electricity Supply and Demand Plan released late 2017, which braced LNG suppliers to South Korea, the world’s third largest LNG market, to expect low demand growth there.
South Korea relies almost wholly on LNG imports for its gas supply; it is estimated to have imported 36.5mn mt in 2017, overtaken last year by China which became the world's second largest LNG market.
WoodMac principal analyst Kiah Wei Giam notes that the South Korean 13th plan’s 40.49mn mt forecast (LNG equivalent) for 2031 represents an increase of just 3mn mt from the 2017 gas level but says this is more upbeat than the country’s 12th gas plan which forecast gas demand to be only 35mn mt by 2029.
Under the 13th plan, he says, gas demand will fall before growing again post 2025, due to the additions of coal and nuclear capacities between now and 2023. WoodMac forecasts 4 gigawatts and 5 GW net additions (new capacities minus retirements) for coal and nuclear respectively over the next five years, these being already under construction and approved under the 8th Electricity Plan.
Kiah though says that policies limiting coal or nuclear generation should help thereafter. In the 8th Plan, all coal units that are over 30 years of age will be required to shut down in spring where electricity demand is low. But “even with gas-friendly polices in place, gas demand will still decline, hitting a trough of 34mn mt in the 2022/23 period,” he writes.
Gas demand will turn the corner post-2024 as 4 GW of coal and 5 GW of nuclear are retired between 2024 and 2031, with no new units of coal nor nuclear will be added beyond those that are approved.
While he expects solar and wind generation to grow by nine times between 2017 and 2031, Kiah says that increase will still be insufficient to meet electricity demand growth – as the government is targeting renewables to account for 20% of power generation by 2030 whereas WoodMac forecasts just 15% - with gas needed to meet the shortfall.
“Hence, we expect gas demand to reach 42mn mt by 2031, around 2mn mt higher than the government's forecast,” says Kiah.
In other news from South Korea, former president Park Geun-hye was sentenced April 6 to 24 years imprisonment and fined $17mn for bribery and coercing Korea’s conglomerates, including Samsung, into signing deals with her crony. She was ousted in March.