South Korea’s POSCO puts Gwangyang LNG terminal on sale

South Korean private steel maker, POSCO is preparing to sell its wholly-owned LNG terminal in a major restructuring of its non-core business, it said on 28 July.

Gwangyang is the only privately owned South Korean terminal in operation and the only facility in the Pacific basin to have been used for re-exports, allowing international market participants to take advantage of seasonal LNG arbitrage opportunities.

Its ability to re-export came hand in hand with the addition of a fourth 165,000 cubic metre (cbm) storage tank last year which took its total storage capacity to 530,000cbm.

In exchange for partly funding the construction costs of the fourth tank, Japanese trading house Itochu secured re-export capacity in a 2010 agreement with POSCO.

The terminal first came into operation in mid-2005 with two storage tanks and a nameplate capacity of 1.7mtpa designed to supply a liberalising domestic electricity generation industry.

Only up to 1.35mtpa however has been delivered to the terminal through two sales and purchase agreements signed in 2004. South Korea’s privately-owned K-Power and POSCO respectively receive up to 800,000 tonnes per annum (tpa) and 550,000tpa from the BP-led Tangguh plant in Indonesia. The contracts last up to 2026.

POSCO splits its regasified LNG with up to 300,000tpa going to its nearby Pohang Works and 250,000tpa to its Gwangyang Works. K-Power, meanwhile, delivers its capacity entirely to its nearby 1074MW power station.

A third storage tank was added to the receiving terminal towards the end of 2010 with a view to improving operational flexibility and catering for any additional power generation demand in the region ( see GLM 11 June 2010 ).

South Korean private companies are allowed to import LNG for their own use provided they sell any surplus to KOGAS. To improve cash flow stability, however, POSCO went beyond its LNG tank lease business for Korean power generation and positioned itself as the first re-export terminal in east Asia.

The company has faced financial difficulties over recent years. Management changes within the organisation earlier this year have spearheaded the current drive to enhance corporate value and improve financial structure.

By selling a non-core business with a high profitability POSCO expects to regain its credit rating, the company said. Ludovic Aldersley