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1、Natural Gas Supply Security in KoreaInsights from the 2022 Gas Supply Shock The IEA examines the full spectrum of energy issues including oil,gas and coal supply and demand,renewable energy technologies,electricity markets,energy efficiency,access to energy,demand side management and much more.Throu

2、gh its work,the IEA advocates policies that will enhance the reliability,affordability and sustainability of energy in its 31 member countries,13 association countries and beyond.This publication and any map included herein are without prejudice to the status of or sovereignty over any territory,to

3、the delimitation of international frontiers and boundaries and to the name of any territory,city or area.Source:IEA.International Energy Agency Website:www.iea.orgIEA member countries:AustraliaAustriaBelgiumCanadaCzech RepublicDenmarkEstoniaFinlandFranceGermanyGreeceHungaryIrelandItalyJapanKoreaLith

4、uaniaLuxembourgMexicoNetherlandsNew ZealandNorwayPolandPortugalSlovak RepublicSpainSwedenSwitzerlandRepublic of TrkiyeUnited KingdomUnited StatesThe European Commission also participates in the work of the IEAIEA association countries:Argentina BrazilChinaEgyptIndiaIndonesiaKenyaMoroccoSenegalSingap

5、ore South Africa Thailand UkraineINTERNATIONAL ENERGYAGENCYNatural Gas Supply Security in Korea Abstract Insights from the 2022 Gas Supply Shock PAGE|3 I EA.CC BY 4.0.Abstract This report was commissioned by the Korea Energy Economics Institute(KEEI)and carried out jointly by the International Energ

6、y Agency(IEA)and the KEEI.The objective of the study was to provide high-level policy recommendations on natural gas security of supply in Korea,particularly within the context of the global gas supply shock that emerged in 2022.The report covers an analysis of the natural gas supply shock in questi

7、on,a detailed review of the Korean natural gas market and recommendations applicable to the Korean market.Natural Gas Supply Security in Korea Acknowledgements Insights from the 2022 Gas Supply Shock PAGE|4 I EA.CC BY 4.0.Acknowledgements,contributors and credits The report was jointly prepared by t

8、he International Energy Agency(IEA)and the Korea Energy Economics Institute(KEEI),with the objective of providing high-level policy recommendations on natural gas security of supply in Korea.The report was directed by Dennis Hesseling,Head of the IEA Gas,Coal and Power(GCP)Markets Division.The lead

9、authors of the report were Frederick Ritter from the IEA,and Dr.Sanglim Lee and Dr.Soyoung Lee from the KEEI,with valuable drafting input from Gergely Molnar and Takeshi Furukawa from the IEA.Keisuke Sadamori,Director of Energy Markets and Security at the IEA,Dr.Yongduk Pak from the KEEI and Dennis

10、Hesseling provided expert comments and senior guidance.Hiroyasu Sakaguchi and Joel Couse provided useful input and advice for the analysis.Finally,the authors are grateful to the IEA Communications and Digital Office,notably Astrid Dumond,Therese Walsh and Clara Vallois,for their support in producin

11、g and promoting this report,and Adam Majoe for editing the report.Natural Gas Supply Security in Korea Reducing Europes reliance on Russian natural gas Insights from the 2022 Gas Supply Shock and the impact on the global liquefied natural gas market PAGE|5 I EA.CC BY 4.0.Reducing Europes reliance on

12、 Russian natural gas and the impact on the global liquefied natural gas market 2022 gas supply shock The Russian invasion of Ukraine on 24 February 2022,the resulting war and the cut in Russian pipeline natural gas supply to Europe together represent the single greatest disruptor of global energy se

13、curity in recent history.These elements intervened in a period already expected to be characterised by progressive liquefied natural gas(LNG)market tightening,driven by post-Covid-19 demand recovery in both Europe and Asia,and by limited liquefaction capacity additions in the first half of the 2020s

14、.The resulting supply shock to natural gas markets brought about an energy crisis that has been felt on a global scale,well beyond the borders of Europe.The end of gas interdependence between Europe and Russia The onset of the war in Ukraine raised immediate concerns in Europe about overreliance on

15、the Russian Federation(hereafter,“Russia”)as a source of natural gas supply.Accordingly,European Union(EU)policy initiatives set out the objective of reducing reliance on Russian gas at an accelerated timeline.In its Versailles Declaration of March 2022,the European Union made a commitment to phase

16、out Russian fossil fuel imports“as soon as possible”.This declaration was reinforced by the publication in May 2022 of the European Commissions REPowerEU package,detailing measures and investments required to reduce fossil fuel dependence on Russia to zero by 2027.Following these announcements,a num

17、ber of EU member states quickly reduced or ceased their imports of Russian gas,while others announced their intention not to renew long-term supply contracts with Gazprom,the Russian majority state-owned energy company,that were set to lapse in 2022.Other member states announced their aim to phase o

18、ut imports of Russian gas in the coming years,in certain cases before the 2027 target in the REPowerEU package.Simultaneously,Gazprom abruptly cut supplies to several EU countries as early as April 2022 following buyers refusal to adhere to a rouble payment requirement that had been introduced unila

19、terally by Russia,thus effectively pre-empting the Natural Gas Supply Security in Korea Reducing Europes reliance on Russian natural gas Insights from the 2022 Gas Supply Shock and the impact on the global liquefied natural gas market PAGE|6 I EA.CC BY 4.0.phase-out of Russian gas in those countries

20、.In September 2022,unexplained explosions on the Nord Stream pipelines rendered three of the four Nord Stream strings inoperative,thus further diminishing the possibilities for physical Russian gas pipeline supplies to Europe.While the unprecedented Russian gas supply disruptions led to sudden and a

21、t times extreme price increases in both gas and electricity in Europe and prompted demand reductions across the continent,Europe navigated the crisis without supply interruptions,thanks to new LNG supplies,policy initiatives and a well-integrated energy market.Russian gas deliveries to Europe Prior

22、to the war in Ukraine,Russia was by far Europes largest gas supply source,meeting just over 50%of the regions yearly gas imports(pipeline and LNG imports)in recent years after constant growth over the past decade.Over this period,the convergence of two key factors led to the sustained predominance o

23、f Russian gas in the European supply mix.Broadly stable EU demand and a fall in domestic production by two-thirds since 2010 linked to ageing gas fields in the United Kingdom,the phasing out of Groningen production in the Netherlands and the plateauing of Norwegian output increased Europes import de

24、pendency,paving the way for growing Russian imports to fill the gap.The reversal in the trend of the growing weight of Russian gas in Europe began prior to the start of the war in Ukraine,as Russian gas deliveries to Europe started declining ahead of the 2021/22 heating season.Over Q4 2021,Russian p

25、ipeline exports to Europe fell by close to 25%year on year,reflecting lower transit flows to both the European Union and Trkiye.Gazprom embarked on a strategy of reducing its exposure to short-term sales to the European Union despite spare supply capacity being available,with no day-ahead auctions c

26、arried out on the companys electronic sales platform over this period.Lower direct sales to European hubs and Gazproms failure to fill its gas storage sites in Europe further contributed to an environment of“artificial scarcity”in the European market.Russias gas supply reductions to Europe accelerat

27、ed further in 2022 following the decision to impose a rouble payment system on European buyers on existing contracts.EU member states largely contested the move by Russia,leading to unilateral cuts in supply to several EU countries and curtailed deliveries to Gazprom subsidiaries in Europe after the

28、y were placed under Russian sanctions.Russian punitive measures also targeted specific pipeline export routes,effectively reducing the number of viable natural gas infrastructure links between Russia and Europe.Following a range of Russian sanctions imposed on European companies in May 2022,Gazprom

29、announced that it would cease using the Yamal-Europe pipeline,a key historical export route through Poland.From mid-Natural Gas Supply Security in Korea Reducing Europes reliance on Russian natural gas Insights from the 2022 Gas Supply Shock and the impact on the global liquefied natural gas market

30、PAGE|7 I EA.CC BY 4.0.June 2022,Gazprom gradually reduced gas deliveries via Nord Stream to just 20%of the pipelines capacity and had completely stopped gas flowing via this route by the beginning of September,leaving only three pipeline systems operational by then(the Ukrainian transit route,Blue S

31、tream and TurkStream).The subsequent acts of sabotage on the Nord Stream and Nord Stream 2 pipelines at the end of September acted as an extra squeeze on Europe,further decoupling the European and Russian natural gas markets.Russian piped gas exports to OECD Europe fell by an estimated 50%(83 bcm)ye

32、ar on year in 2022 to their lowest level since the mid-1980s,with deliveries to Trkiye declining by 18%year on year and supply to the European Union falling by more than half.As a result,Russian deliveries to several European offtakers fell below their minimum contractual commitments throughout the

33、year,adding to structural uncertainty in the market and driving acute price pressure throughout 2022.In contrast to the drastic fall in Russian pipeline deliveries to Europe,Europes increased appetite for LNG led to an increase in imports of Russian LNG.As pipeline imports of Russian gas dropped,tot

34、al European LNG imports grew by approximately 60%year on year to reach nearly 170 bcm in 2022,an increase which was balanced by a steep decline in LNG deliveries to other markets,particularly in Asia.As a result,LNG effectively became a baseload supply in Europe,meeting over one-third of the regions

35、 gas demand over the 2022/23 winter period.In this context,Europe attracted a growing amount of Atlantic Basin LNG cargoes in 2022,importing nearly 90%of US LNG exports(up from less than 45%in 2021).European imports of Russian LNG also grew by over 30%from 2021 levels.Other supplies to Europe The ex

36、ceptional increase in European LNG imports to replace Russian pipeline volumes also highlighted existing limits on the availability of incremental pipeline imports from longstanding alternative gas suppliers to Europe.Spare capacity at existing LNG regasification plants allowed for a swift increase

37、in LNG cargo arrivals in Europe throughout 2022,while quick implementation of debottlenecking works at some of those facilities and the rapid installation of floating storage and regasification units(FSRUs)added further import capacity in time for the 2022/23 heating season.However,spare capacity in

38、 alternative pipeline import routes was far lower,leaving less room for incremental flows in response to falling Russian deliveries.Natural Gas Supply Security in Korea Reducing Europes reliance on Russian natural gas Insights from the 2022 Gas Supply Shock and the impact on the global liquefied nat

39、ural gas market PAGE|8 I EA.CC BY 4.0.Average quarterly regasification utilisation rates,2020-2023 IEA.CC BY 4.0.Note:Northwest Europe includes Belgium,France and the Netherlands.Northern Europe includes Germany,Lithuania and Poland.Iberia includes Portugal and Spain.Mediterranean includes Croatia,G

40、reece and Italy.Source:IEA analysis based on GIE(2023),ALSI.Pipeline flows from Norway rose by 3%(or 4 bcm)in 2022,with deliveries increasingly directed towards the European Union(up by 9%)at the expense of the United Kingdom(down by 14%).Gas supply from Azerbaijan surged by 40%(or 3 bcm)year on yea

41、r as the Trans Adriatic Pipeline operated at its full nameplate capacity of 10 bcm.Overall flows from North Africa fell by 10%(4 bcm)as a result of lower Libyan flows,fluctuating Algerian production and the closure of the Maghreb-Europe pipeline,one of the two pipeline entry points for Algerian gas.

42、In total,growth in non-Russian pipeline gas supply to Europe was marginal compared to the 66-bcm increase in LNG imports.Year-on-year change in European natural gas imports and deliveries from Norway,2019-2022 IEA.CC BY 4.0.Source:IEA analysis based on ICIS(2023),ICIS LNG Edge,and ENTSOG(2023),Trans

43、parency Platform.Natural Gas Supply Security in Korea Reducing Europes reliance on Russian natural gas Insights from the 2022 Gas Supply Shock and the impact on the global liquefied natural gas market PAGE|9 I EA.CC BY 4.0.Price impact:TTF and JKM As Russian gas deliveries to Europe tumbled and glob

44、al gas market tensions worsened through 2022,natural gas price movements highlighted the various stages of tightening market fundamentals,reaching successive record highs in both Europe and Asia.In late 2021,a number of factors drove growing market pressure in Europe,including strong gas demand reco

45、very after the Covid-19-induced lockdowns,plummeting domestic gas production and increased competition for LNG due in part to a strong recovery in Asian demand.Adding to these bullish fundamentals,the reduction in Russian gas deliveries to Europe in Q4 2021 resulted in a tight gas market,driving bot

46、h prices and volatility to then-record levels.Month-ahead prices at the Dutch TTF hub reached USD 60/MMBtu in December 2021,nearly eight times the January-June 2021 average.Asian spot LNG price swings grew similarly over 2021,highlighting the continued strong correlation between European and Asian g

47、as price benchmarks.As European gas prices skyrocketed,Asian spot LNG prices were also dragged up,reaching above USD 45/MMBtu in late 2021,nearly five times the first-half 2021 average.This high degree of correlation between European and Asian prices was driven by growing volumes of destination-flex

48、ible and spot LNG globally,as well as the broader evolution in marketing strategies towards greater contractual optionality,allowing for the more efficient redirection of LNG flows in response to demand pressures across different demand basins.Throughout 2022,global market tightness further intensif

49、ied,pushing global gas and LNG prices to their highest-ever levels and uncovering new price dynamics both within the European market and between Europe and Asia.The constitution of Europes gas market,from both an infrastructure and regulatory standpoint,has long ensured ideal conditions for the exch

50、ange of natural gas.Multiple pipeline and LNG entry points,harmonised third-party access rules on gas infrastructure,extensive interconnections between EU member states with harmonised auction rules and multiple liquid and well-traded hubs have generally ensured a high degree of correlation between

51、Europes multiple pricing points,with TTF as the leading hub.Under this structure and these conditions,market participants have been able to react efficiently to price signals stemming from temporary market imbalances,minimising price spreads across the continent.However,the cut in Russian gas delive

52、ries to Europe induced a significant reconfiguration of the dominant gas flows across the continent,undermining some of the key factors that had ensured a strong intra-European price correlation.While imports of Russian gas had previously led to a predominantly east-to-west pattern of gas flows,the

53、rapid influx of LNG to replace the missing Russian volumes Natural Gas Supply Security in Korea Reducing Europes reliance on Russian natural gas Insights from the 2022 Gas Supply Shock and the impact on the global liquefied natural gas market PAGE|10 I EA.CC BY 4.0.switched the direction of flows as

54、 incremental LNG imports accessed the market largely through Northwest Europe,a region with substantial regasification capacity.Through 2022,gas flow patterns across the continent increasingly took on a west-to-east direction,straining the intra-European interconnection capacity that had long been d

55、imensioned to absorb significant Russian pipeline volumes.As a result of these interconnection constraints,bottlenecks arose,and unprecedently high spreads appeared between European hubs that had traditionally tended to converge.Month-ahead gas prices in Asia and Europe and the Asia-Europe price dif

56、ferential,2012-2023 IEA.CC BY 4.0.Source:IEA analysis based on ICIS(2023),ICIS LNG Edge.New price dynamics also emerged between Europe and Asia amidst the market tightening of 2022.While European and Asian prices remained highly correlated through the gas crisis,the longstanding Asia-Europe price sp

57、read was inversed.Traditionally,Asia had commanded an LNG price premium over Europe,reflecting the need to attract LNG volumes not only from the Pacific Basin but also from the Atlantic Basin.Periods of stronger European demand would reduce this premium(generally inversing it only over short periods

58、 of time),sending a sufficient market signal to attract extra LNG cargoes.This changed in 2022 with Europes exceptionally strong pull on the LNG market,instilling a persistent European premium over Asian prices,reaching as high as 60%and leading to a record redirection of LNG cargoes from Asia to Eu

59、rope.This phenomenon eased in 2023,with Asian LNG prices recovering a steadier premium to European hub prices by the second quarter,leading to a progressive redirection of LNG flows from Europe to Asia.Natural Gas Supply Security in Korea Reducing Europes reliance on Russian natural gas Insights fro

60、m the 2022 Gas Supply Shock and the impact on the global liquefied natural gas market PAGE|11 I EA.CC BY 4.0.Demand impact In the wake of the Russian supply shock to Europe and the surge in gas prices,European natural gas demand contracted by a record amount.In OECD Europe,demand in 2022 fell by 13%

61、,or over 70 bcm,the steepest y-o-y volumetric drop in history.Shifts in the energy mix,fluctuations in economic activity,weather effects,policy interventions and behavioural changes all contributed to this dramatic shift in natural gas consumption,with varying degrees of intensity across different s

62、ectors and different periods of the year.Estimated drivers of change in natural gas demand in the European Union,2022 versus 2021 IEA.CC BY 4.0.Source:IEA(2023),Europes Energy Crisis:What Factors Drove the Record Fall in Natural Gas Demand in 2022?Distribution network-related demand registered the l

63、argest absolute reduction,falling by 34 bcm(15%)and accounting for nearly half of the total demand reduction compared to 2021 levels.Unseasonably mild temperatures in October and the first half of November delayed the start of the European heating season by close to a month,weighing on space heating

64、 requirements.The high-price environment also incentivised a degree of fuel switching,energy efficiency measures and conservation efforts in the residential and commercial sectors.Government campaigns raised awareness about gas savings,and evidence suggests that consumers adjusted household heating

65、temperatures to reduce their consumption.The continued implementation of energy efficiency measures,such as improving insulation,replacing boiler systems and installing heat pumps,also contributed to reducing demand.These structural reductions in gas use during seasonal peaks will carry over into fu

66、ture years.Given the predominance of space heating-related gas savings,over 40%of the total reduction in annual demand was concentrated in Q4 2022.Natural Gas Supply Security in Korea Reducing Europes reliance on Russian natural gas Insights from the 2022 Gas Supply Shock and the impact on the globa

67、l liquefied natural gas market PAGE|12 I EA.CC BY 4.0.In industry,gas demand fell by close to 20%,or 30 bcm,with high gas prices driving fuel switching and leading to production curtailments across multiple industrial segments.Gas-and energy-intensive industries were the first to respond to price sh

68、ocks in Europe,with plants in certain sectors reducing their output as production costs became too high to compete with imported final goods.In other cases,high gas prices led to an increase in imports of intermediate gas-intensive goods.This explains why industrial production in some gas-intensive

69、sectors such as fertilisers,steel and aluminium on average decreased by less than gas demand in these sectors.Fuel switching particularly towards oil products and alternative gases also contributed to this phenomenon of a greater reduction in industrial gas demand than industrial production.The powe

70、r sector contributed the least to the reduction in European gas demand,falling by just 4%,or 6 bcm,driven by various opposing power market fundamentals.Ongoing policy support for renewables drove strong capacity additions,with a record high of nearly 50 GW of wind and solar capacity installed in the

71、 European Union in 2022.These additions avoided the need for around 11 bcm of natural gas in the power sector,the single largest structural driver of reduced natural gas consumption in the European Union.The combination of high gas prices and lower electricity demand also contributed to reduced powe

72、r sector gas burn.High prices drove gas-to-coal switching as coal-fired plants became increasingly economical to run.With gas plants at the margin of the power mix,reductions in electricity demand had a direct impact on gas consumption for power generation.Despite these factors inducing a fall in po

73、wer sector gas demand,countering dynamics also came into play.Exceptional outages in the French nuclear plant fleet and low water reservoir levels led to a sharp decline in nuclear power and hydropower output to decade-low levels,softening the overall decrease in gas consumption in the power sector.

74、Policy and infrastructure implications The Russian invasion of Ukraine and the global energy crisis it triggered once again reminded the world of the importance of ensuring energy security,highlighting the need to reduce vulnerabilities linked to fossil fuel import dependency and accelerate clean en

75、ergy transitions.In Europe,this led to a swift reaction in policy and infrastructure developments as the European Union confirmed its dual objective of diversifying its gas supply away from Russia and fast-tracking its decarbonisation agenda.Natural Gas Supply Security in Korea Reducing Europes reli

76、ance on Russian natural gas Insights from the 2022 Gas Supply Shock and the impact on the global liquefied natural gas market PAGE|13 I EA.CC BY 4.0.Policy developments REPowerEU The REPowerEU plan,announced just days after the start of the war in Ukraine and subsequently published in May 2022,synth

77、esised the European Unions policy objectives.The plan reinforced the existing ambitions set out in the European Unions Fit for 55 package,but it also called for both a“speed-up and scale-up”in key measures targeting energy savings,supply diversification and renewable development.This included streng

78、thening binding targets in the existing Energy Efficiency Directive,accelerating the rollout of key heating and electricity production technologies,and boosting targets for renewable hydrogen and biomethane production.The REPowerEU plan also highlighted the importance of investment in European energ

79、y infrastructure needs in response to the development of new energy flows and supply chains.Taken together,these proposed actions aimed to significantly change the European energy system and phase out fossil fuel imports from Russia on an accelerated time horizon,paving the way for a number of expli

80、cit EU policy measures to support those objectives.Demand reduction At the end of July 2022,the European Union adopted a regulation on co-ordinated demand reduction measures for gas demand,setting a target of 15%voluntary demand reduction compared to the five-year average between 1 August 2022 and 3

81、1 March 2023.In the instance of the substantial risk of a severe gas supply shortage or insufficient cuts in gas demand,a“Union alert”could be declared by the European Council upon the European Commissions proposal.The declaration of such a Union alert would render the gas demand reduction target ma

82、ndatory.EU member states successfully reduced their gas demand on a voluntary basis over the period,achieving a reduction of 19%in total EU demand compared to the 5-year average.As a result of its initial success,the 15%demand reduction regulation was extended in March 2023 to cover the April 2023-M

83、arch 2024 period,again letting member states choose the measures by which to reach the target.Gas storage Although part of a medium-term plan to cease Russian gas imports,EU policy action equally responded to immediate-term gas security of supply imperatives.One such measure was the EU storage regul

84、ation adopted in June 2022.The regulation,in line with the analysis and recommendations published by the IEA in Natural Gas Supply Security in Korea Reducing Europes reliance on Russian natural gas Insights from the 2022 Gas Supply Shock and the impact on the global liquefied natural gas market PAGE

85、|14 I EA.CC BY 4.0.A 10-Point Plan to Reduce the European Unions Reliance on Russian Natural Gas in March 2022,set out minimum fill levels for EU gas storage ahead of winter.With an adequate buffer of gas in storage facilities,the European Union could more easily respond to further supply-side const

86、raints and potential seasonal demand spikes through the winter.Under the regulation,EU member states gas storage would have to be filled to at least 80%of capacity by 1 November 2022,rising to a 90%target by the start of subsequent winter seasons.The regulation also included intermediate storage lev

87、el targets aimed at achieving an optimal storage cycle through the year and allowing for the early detection of potential shortfalls in injection trajectories.Several member states adopted even more stringent storage regulations,setting higher fill levels for the November target.Ahead of the 2022/23

88、 winter,storage fill in the European Union surpassed the 80%target,reaching 88%by late September and climbing as high as 96%by mid-November.In 2023,storage injections again outpaced the set target,surpassing the 90%target in the month of August.While the storage fill targets were successful in terms

89、 of ensuring sufficient gas in storage,they may well have had unintentional price effects.In some instances,the entities entrusted with the task of filling the stores had a strong volume incentive but no price incentive.This may not only have led to an increased storage filling bill but may also hav

90、e contributed to higher overall European gas price levels.Joint gas procurement Among the European Unions headline policy initiatives resulting from the gas crisis was an effort to enhance solidarity through the better co-ordination of gas and LNG purchases at the European level.In December 2022,the

91、 European Council adopted a regulation setting up the Joint Purchasing Mechanism,intended to create a framework and platform for the European Union to aggregate demand and purchase gas jointly.Natural Gas Supply Security in Korea Reducing Europes reliance on Russian natural gas Insights from the 202

92、2 Gas Supply Shock and the impact on the global liquefied natural gas market PAGE|15 I EA.CC BY 4.0.Simplified representation of the EU Joint Purchasing Mechanism for gas IEA.CC BY 4.0.Source:IEA analysis based on European Commission(2022),EU Energy Platform.The platform provides a mechanism to aggr

93、egate demand volumes submitted by EU companies and match them against volumes proposed by non-Russian gas suppliers through tendering rounds,acting as a marketplace to connect demand-side and supply-side market actors.Following the matching of demand and supply,market participants can voluntarily co

94、nclude supply contracts.While the conclusion of contracts is voluntary and not compulsory,there is a requirement for member states to ensure the participation of companies in the demand aggregation step by a volume equivalent to 15%of their gas storage requirements,as set out by the EU gas storage r

95、egulation.At the EU level,this meant a minimum required participation of approximately 13.5 bcm,or 3%of EU gas consumption,in 2021.The first three aggregation tenders launched in 2023 gathered a total bid call of nearly 45 bcm and a total supply bid of over 20 bcm,leading to nearly 35 bcm of aggrega

96、ted demand being matched to supply in the process.Information about the volumes of gas contracted following the matching process and the contract Natural Gas Supply Security in Korea Reducing Europes reliance on Russian natural gas Insights from the 2022 Gas Supply Shock and the impact on the global

97、 liquefied natural gas market PAGE|16 I EA.CC BY 4.0.prices have not been communicated,but the European Commission has reported that 25 suppliers participated in each of the first two tenders and 39 companies submitted demand bids in the third round.However,four industry associations,the Internation

98、al Association of Oil&Gas Producers,the European Federation of Energy Traders,Europex and the International Gas Union,have been critical of the joint purchasing mechanism,expressing their preference for using existing commercial channels and energy exchanges and stressing that,in their view,the prop

99、er functioning of the EU internal energy market is at the core of solving the supply crisis.As highlighted by the IEA report,How to Avoid Gas Shortages in the European Union in 2023,the joint purchasing of natural gas could increase the bargaining power of EU companies,enable more sophisticated risk

100、-sharing arrangements in a highly volatile price environment and potentially facilitate the sharing of best practices related to bringing low-emission gas to market.Despite the European gas market being already well developed in connecting demand-side and supply-side market actors,joint gas procurem

101、ent could potentially add value in helping certain buyers contract new sources of gas supply(notably LNG),particularly in Central and Eastern European markets,which historically relied heavily on imports of Russian gas.These markets are often relatively small,face logistical issues in sourcing LNG(b

102、eing landlocked)and have limited experience in LNG sourcing and trading.Infrastructure developments In tandem with the policy developments in response to the gas supply crisis,the European Union saw equally important and rapid advances in infrastructure development aimed at facilitating the shift aw

103、ay from Russian gas and upholding defining facets of the EU market.Regasification terminals and floating storage and regasification units LNG proved central in offsetting the dramatic decline in Russian gas flows to Europe through 2022.Spare regasification capacity at existing LNG terminals allowed

104、the European Union to import 70%,or 35 bcm,more LNG in the first 8 months of 2022 than over the same period in 2021.However,with utilisation rates near nameplate capacity in Northwest Europe ahead of the 2022/23 winter,existing infrastructure was potentially unable to deliver further incremental imp

105、orts of LNG.1 1 Despite high regasification utilisation rates across much of Europe,limited pipeline interconnection between Spain and the rest of the continent has limited the use of this countrys LNG import infrastructure,leading to significant spare regasification capacity.Natural Gas Supply Secu

106、rity in Korea Reducing Europes reliance on Russian natural gas Insights from the 2022 Gas Supply Shock and the impact on the global liquefied natural gas market PAGE|17 I EA.CC BY 4.0.Cumulative regasification capacity additions in Europe by quarter IEA.CC BY 4.0.Source:IEA analysis based on ICIS(20

107、23),ICIS LNG Edge.Planned debottlenecking and capacity expansion programmes at existing plants and the leasing of FSRUs allowed the European Union to expand its regasification capacity by 15%(or 25 bcm/year)during the 2022/23 heating season.In addition to the expansion of the onshore Gate terminal(4

108、 bcm/year)in the Netherlands,FSRU projects included the startup of the Eemshaven LNG terminal(8 bcm/year)in the Netherlands,three FSRUs in Germany(with a combined capacity of about 13 bcm/year),and the joint Estonia-Finland FSRU(approximately 5 bcm/year).Further regasification capacity was installed

109、 or expected to come online through 2023 and the 2023/24 heating season,including an FSRU in France and further import facilities in Germany,with yet further plans to transition certain FSRUs into more permanent land-based capacity later in the decade.However,while the European Unions expanding rega

110、sification capacity provides additional possibility to import LNG,it does not necessarily guarantee an increase in LNG supply.Several European Union-based companies secured additional LNG supply via tenders and long-term LNG contracts since the start of the gas crisis,but the majority of further inc

111、remental LNG supply in the short term is expected to be sourced from the spot market.Beyond the new LNG import capacity that has been installed or is currently under construction,many further regasification projects have been proposed in Europe with varying construction timelines.However,exactly how

112、 much of this proposed capacity will be built remains unclear as Europe balances short-term security of supply requirements,uncertainty in medium-term LNG demand and the challenge of building infrastructure in line with its climate and energy objectives.A key element in aligning these three factors

113、is the fact that the majority of these new European regasification projects whether recently installed,under Natural Gas Supply Security in Korea Reducing Europes reliance on Russian natural gas Insights from the 2022 Gas Supply Shock and the impact on the global liquefied natural gas market PAGE|18

114、 I EA.CC BY 4.0.construction or announced are FSRUs.These FSRUs are generally leased for a defined period of time(often for 5 years)to respond to an immediate and short-term import need without necessarily committing EU markets to long-term infrastructure lock-in.The European debate around natural g

115、as infrastructure development has incorporated the idea of future-proofing new assets to reduce the risk of investing in stranded assets or locking in future fossil fuel consumption.Under this approach,new and more permanent LNG-importing terminals would need to allow for conversion into renewable e

116、nergy carriers,such as hydrogen and hydrogen derivatives.However,the planning of“hydrogen-ready”infrastructure is still in the relatively early stages,with a degree of uncertainty remaining around the technical,financial and market aspects.Interconnectors The longstanding EU goal of creating a singl

117、e energy market was built on a robust network of infrastructure links between member states.In gas markets,interconnectors have ensured the flow of gas from import entry points(LNG and pipeline supply)towards demand centres.Furthermore,these pipeline links have brought flexibility to the European ma

118、rket,with bidirectional interconnection capacity allowing flows to respond to both spontaneous and seasonal variability in supply and demand dynamics.This infrastructure network has effectively acted as the backbone for the free flow of gas within the European market.With imported gas flow patterns

119、evolving strongly as a result of reduced deliveries of Russian gas,reinforcing the security of gas supply in the European Union was also a matter of improving and adapting interconnectivity between member states.While most of these interconnectors were developed many years before Russias invasion of

120、 Ukraine for more generic purposes,these pipeline projects help ease potential bottlenecks and facilitate the dispatch of gas volumes to where they are most needed within the European Union.As import supply routes have evolved,so too has interconnection infrastructure.The Baltic Pipe,inaugurated in

121、September 2022,was among the key infrastructure developments in Europe,providing an alternative supply route into the Baltic region,which had previously been highly reliant on imports of Russian gas.As part of the broader Baltic Energy Market Interconnection Plan(which precedes the Russian invasion

122、of Ukraine by more than a decade),the pipeline connects Norway to Poland with 10 bcm of transmission capacity,with a further 3-bcm link between Poland and Denmark.As such,the Baltic Pipe provides an extra supply route for Europes now-largest pipeline supplier to orient volumes in response to evolvin

123、g market dynamics on the continent.Natural Gas Supply Security in Korea Reducing Europes reliance on Russian natural gas Insights from the 2022 Gas Supply Shock and the impact on the global liquefied natural gas market PAGE|19 I EA.CC BY 4.0.The bidirectional Gas Interconnector Poland-Lithuania(GIPL

124、),commissioned in May 2022,is another key piece of infrastructure aimed at strengthening interconnectivity in the Baltic region,adding 2 bcm of transmission capacity towards Lithuania and 1.9 bcm of interruptible capacity towards Poland.Together,GIPL,Baltic Pipe,and the interconnection expansion bet

125、ween Latvia and Lithuania mark an additional step towards the full integration of the Baltic market zone into the EU internal energy market,enhancing the flexibility of and accessibility to the existing gas supply infrastructure in the zone,notably LNG regasification terminals in Poland and Lithuani

126、a,and underground storage in Latvia.In August 2022,Gas Interconnector Poland-Slovakia was inaugurated.With a capacity of 4.7 bcm towards Slovakia and 5.7 bcm towards Poland,the interconnector establishes a physical link between the two countries and advances the implementation of the North-South Gas

127、 Corridor,which aims to better connect Central and Eastern European countries.In October 2022,both Gas Interconnector Greece-Bulgaria(3 bcm towards Bulgaria)and the expansion of transmission capacity between Romania and Hungary were inaugurated,facilitating access to pipeline gas imports from Azerba

128、ijan and regasified LNG via Greeces LNG terminals as supply alternatives to lost Russian flows.Another key pipeline infrastructure development came in direct response to the disruption in Russian gas.In October 2022,Frances transmission system operator announced the first physical delivery of natura

129、l gas from France to Germany.The only existing interconnection point between France and Germany was originally designed to operate in the Germany-France direction as part of the network of infrastructure delivering gas from east to west.With a number of technical adjustments co-ordinated between the

130、 transmission system operators of both countries,a reverse flow capacity of up to 3.3 bcm/year became available from France to Germany.Underground gas storage and liquefied natural gas storage The global energy crisis triggered by Russias invasion of Ukraine put the spotlight on natural gas storage

131、and its regulation.Natural gas storage plays a key role in meeting seasonal demand swings and ensuring gas supply adequacy in markets with cold and temperate climates,notably in Europe.For instance,storage withdrawals met over 40%of EU gas demand during the coldest winter days in early December 2022

132、 and late January 2023.In addition,the short-term deliverability provided by fast-cycling storage sites(such as salt and rock caverns)is crucial in meeting the fluctuating needs of the power sector through all periods of the year,especially in markets where coal-fired power generation is being phase

133、d out and reliance on gas-fired power plants is increasing.In terms of absolute storage Natural Gas Supply Security in Korea Reducing Europes reliance on Russian natural gas Insights from the 2022 Gas Supply Shock and the impact on the global liquefied natural gas market PAGE|20 I EA.CC BY 4.0.volum

134、e,the European Unions total storage capacity of around 100 bcm is equivalent to approximately one-quarter of its annual gas demand in recent years.While storage sites are not the only providers of gas supply flexibility,practical experience shows that they are typically the most reactive in instance

135、s of supply and demand shocks.Bringing additional volumes of LNG to the market usually takes at least several days;piped imports can be ramped up more quickly,but there is usually a limit in volumetric terms.In contrast,storage sites are typically located close to demand centres and,hence,are readil

136、y available to meet additional demand or make up for lost supplies.Storage can therefore provide a significant security buffer for gas and the wider energy system.Europes underground gas storage(UGS)capacity is set to increase in the short term,largely driven by Trkiye.By the end of 2022,the Silviri

137、 storage site was expanded from 3.2 bcm to 4.6 bcm,and the Tuz Gl(salt cavern)storage facility is set to increase its working capacity from 1.2 bcm to 5.4 bcm.Storage capacity expansions are also expected in the European Union.In Poland,the capacity of UGS Strachocina was increased from 0.36 bcm to

138、0.46 bcm from the start of the 2023/24 winter season.In addition,UGS Wierzchowice is set to be expanded from 1.3 bcm to 2.1 bcm by 2025.In Bulgaria,the working capacity of the Chiren storage site was set to almost double from the current 0.55 bcm to 1 bcm in 2024.In Romania,the Bilciureti storage si

139、te will be enhanced,increasing its storage capacity from 1.31 bcm to 1.42 bcm and its daily withdrawal capacity from 14 mcm/d up to 20 mcm/d by 2027.In the United Kingdom,the Rough gas storage facility was reopened ahead of the 2022/23 heating season with a capacity of 0.85 bcm,although this represe

140、nted just 25%of its pre-closure capacity in 2017.The working capacity of Rough was set to increase by 0.2-0.25 bcm ahead of the 2023/24 winter season.Additionally,new FSRUs across Europe,the reopening of the El Musel LNG terminal in Spain,and the expansion of the Gate terminal in the Netherlands are

141、 set to add slightly more than 1 bcm of LNG storage capacity over the 2023-26 period.While the European Unions policy response to the fall in Russian gas deliveries to Europe aimed to maximise the utilisation of existing storage facilities,the loss of Russian supply flexibility has raised questions

142、about the dimensioning of European underground gas storage infrastructure.Increased storage capacity could allow for more countercyclical buying,easing seasonal pressure in the global gas market.Improved withdrawal capacities could equally help ease the loss of daily flexibility as regasification in

143、frastructure already operates at high utilisation rates and alternative pipeline supply routes have relatively limited room to ramp up deliveries.Natural Gas Supply Security in Korea Reducing Europes reliance on Russian natural gas Insights from the 2022 Gas Supply Shock and the impact on the global

144、 liquefied natural gas market PAGE|21 I EA.CC BY 4.0.Medium-term considerations and liquefied natural gas contracting Structural changes The European gas market has traditionally provided a significant amount of flexibility to the global gas market,intervening in both the demand and supply sides.The

145、 power sector was a key driver of this flexibility on the demand side.Significant coal-and gas-fired capacity across Europe facilitated fuel switching in power generation,providing a key source of price-responsive demand.In tightening gas market conditions,higher gas prices would drive a shift towar

146、ds coal-based power plants,reducing gas burn in the sector.Conversely,easing gas prices would tilt generation economics in favour of gas plants,leading to greater gas consumption in the sector.On the supply side,the continents flexibility came from the predominant share of Russian pipeline gas suppl

147、y in the European gas mix.Contractual terms and extensive infrastructure allowed for both seasonal and annual supply flexibility.As such,Russian gas deliveries responded to domestic weather-driven heating demand patterns,rising in winter periods and decreasing in summer periods.Moreover,pipeline imp

148、orts of Russian gas proved reactive to global fundamentals,evolving in relation to the attractiveness of LNG imports from year to year.Together,these dual elements of demand-and supply-side flexibility lent Europe the role of market of last resort for LNG.With ample and varied supply sources,Europe

149、could forego a share of its LNG imports in periods of tight global market conditions but could also absorb surplus volumes in periods of oversupply.Effectively,Europe acted as the balancing market for global LNG trade.However,the steep reduction in Russian gas deliveries observed since late 2021 jeo

150、pardised this balancing role.The loss of Russian pipeline volumes reduced Europes supply margin and implied the loss of supply-side flexibility across the continent as the utilisation of alternative pipeline and LNG infrastructure increased to replace lost Russian volumes.As a result,LNG has progres

151、sively gained market share in the European supply mix,replacing Russian pipeline volumes as the baseload supply to Europe.Over the first half of 2023,LNG accounted for almost 40%of European gas consumption,a share similar to Russias before its invasion of Ukraine.Meanwhile,Russian piped gas exports

152、to OECD Europe fell by an estimated 65%year on year in H1 2023 alone,bringing the share of the regions gas demand met by Russian piped gas to below 10%over this period.Natural Gas Supply Security in Korea Reducing Europes reliance on Russian natural gas Insights from the 2022 Gas Supply Shock and th

153、e impact on the global liquefied natural gas market PAGE|22 I EA.CC BY 4.0.Furthermore,these drastic supply-side changes intervened at a time of longer-term and progressive demand-side evolutions that also acted as a limiting factor on flexibility.Europe has made progress towards decarbonising its e

154、lectricity mix by steadily phasing out coal-fired plants and increasing its share of renewable electricity generation,notably from non-dispatchable sources.Together,the retirement of coal-fired plants and growing additions of solar PV and wind capacity suggest a progressive reduction in price-respon

155、sive gas demand in Europe,limiting a key source of historical demand-side flexibility.Under these new market conditions,gas market flexibility has been transferred from Europe towards other markets.Despite a significant reduction in European gas demand as a result of the gas crisis,the continents st

156、rong pull on LNG volumes resulted in an equivalent reduction of LNG imports in other markets,particularly in Asia.Markets with higher price elasticity of demand became the new source of demand-side flexibility in response to the gas crisis,acting as the new markets of last resort for LNG.Medium-term

157、 liquefied natural gas market outlook Global LNG trade is forecast to grow by nearly 25%(or just over 130 bcm)by 2026 compared with 2022 levels,with over 70%of incremental supply expected to arrive on the market in 2025 and 2026.Although project delays and varying ramp-up schedules could alter the f

158、orecast,this strong growth in LNG supply is expected to ease market tensions in the second half of the decade,moderating gas supply security risks.North America and Qatar are set to drive the expansion of LNG exports in the medium term,together accounting for over 80%of incremental supply through 20

159、26.While no growth is expected from Australia over this period,the country will remain the third-largest LNG exporter,far ahead of the next largest export markets.Incremental LNG demand over this period will be concentrated in the Asia Pacific region,with growth markets led by the Peoples Republic o

160、f China(hereafter,“China”)far outweighing the slowdown in mature markets in the region.However,uncertainty remains surrounding LNG demand growth in emerging Asian gas markets as affordability and market stability continue to be key factors in the take-up of natural gas in certain sectors and countri

161、es.An increasingly globalised LNG market driven by growing inter-regional trade will lead to greater interdependence across regions.As experienced in the crisis that unfolded in 2022,events that induce price volatility and supply uncertainty in one region can impact price fluctuations and supply-dem

162、and dynamics in geographically distant markets.An increasingly globalised gas and LNG market will reinforce the need Natural Gas Supply Security in Korea Reducing Europes reliance on Russian natural gas Insights from the 2022 Gas Supply Shock and the impact on the global liquefied natural gas market

163、 PAGE|23 I EA.CC BY 4.0.for careful planning of security of supply at the national level and for enhanced co-ordination between producers and consumers at the international level.Year-on-year change in key piped natural gas and global LNG supply,2022-2026 IEA.CC BY 4.0.Source:IEA analysis based on E

164、NTSOG(2023),Transparency platform,and ICIS(2023),LNG Edge.Liquefied natural gas contracting The LNG market has gained in depth and liquidity in recent years.2 Total contract volumes expanded by 60%between 2016 and 2022,progressing to a situation where both buyers and sellers have a variety of option

165、s to choose from.The share of destination-free contracts has increased from 30%in 2016 to over 46%in 2022,providing flexibility in trading.Main sources of liquefied natural gas supply For post-final investment decision(FID)projects,71 bcm/yr of new contracts were concluded in 2022,a 10%decrease in c

166、ontract volume compared to 2021.However,when pre-FID contracts are taken into account,the total contract volume in 2022 increases to just over 100 bcm/yr,a 28%increase compared to 2021.Europes share of contracted volumes as a buyer increased from 5%in 2021 to 25%in 2022.2 This analysis is based on t

167、he contractual positions of exporters and importers and their actual contract volumes using the IEAs internal LNG contract database.Unless otherwise stated,only firm supply contracts are taken into account.These include LNG sale and purchase agreements,equity entitlements and tolling agreements link

168、ed to an LNG supply project that is either operational,under construction or has reached a final investment decision.Natural Gas Supply Security in Korea Reducing Europes reliance on Russian natural gas Insights from the 2022 Gas Supply Shock and the impact on the global liquefied natural gas market

169、 PAGE|24 I EA.CC BY 4.0.On the export side,North America continued to dominate LNG contracts,accounting for 60%of contracted volumes in 2022(or 43 bcm/yr).The next largest export area was the Middle East,accounting for 16%(or 11 bcm/yr).When pre-FID contracts are taken into account,North Americas sh

170、are increases further,accounting for 70%of the 2022 contract volume(or 70 bcm/yr).This means that there are a number of plans under consideration for FID in this area.On the import side,portfolio players drove contract volumes in 2022,accounting for around 35%(or 25 bcm/yr).Asia continued to dominat

171、e contract volumes in 2022,accounting for 40%(or 28 bcm/yr)of new contracts.European buyers increased their LNG contract volumes in 2022 due to the impact of Russias invasion of Ukraine.European LNG contract volumes increased from 4 bcm/yr in 2021 to 18 bcm/yr in 2022,the highest level in the past 5

172、 years.Contract volumes concluded by region and exporting or importing source,2018-2023 IEA.CC BY 4.0.Notes:Contracted volumes used for the analysis are associated with confirmed export projects that have taken FID.The label 2023 indicates the volumes signed by the end of December 2023.“Portfolio”vo

173、lumes are contracted by a market player who may source a product from one or multiple regions to fulfil contractual obligations.Source:IEA analysis based on ICIS(2023),ICIS LNG Edge.Portfolio players share of the total contract volume(including pre-FID contracts)rose from 12%in 2021 to over 40%in 20

174、22.This indicates that portfolio players are playing an important role in bridging the gap between certain buyers who are reluctant to sign long-term contracts and sellers who have to secure long-term contracts so that new projects can be approved.The total contract volume signed in 2023(including p

175、re-FID contracts)was around 90 bcm,10%above the 3-year average from 2020 to 2022.New contracts with post-FID projects accounted for about 70%of the total volume contracted in 2023.Natural Gas Supply Security in Korea Reducing Europes reliance on Russian natural gas Insights from the 2022 Gas Supply

176、Shock and the impact on the global liquefied natural gas market PAGE|25 I EA.CC BY 4.0.On the export side,the Middle East accounted for around 60%of contracted volumes and North America for about 20%of new contracts in 2023.When including pre-FID contracts,North Americas share rises to over 45%.On t

177、he import side,Asian buyers continued to dominate,accounting for around 40%of the contracted volume,with China alone signing 20%of the contracted volume.Europe accounted for 30%of contracts signed in 2023,3 the highest level since 2016.Portfolio players made up a significant share of contracting act

178、ivity in 2023,accounting for 27%of volumes signed,or 31%when including pre-FID contracts.Contract types In 2022,LNG contracts showed trends of long contract durations,large volumes and an increase in destination-flexible contracts.Long-term contracts(with a duration of over 10 years)accounted for 90

179、%of LNG contracts in 2022,the highest share since 2020.This high share was driven by Asian buyers,who accounted for 44%,with 29%from China alone.In 2023,the share of long-term contracts reached 81%.For Europe,around 90%of the contract volume has been long-term since 2022.The extreme price volatility

180、 and increased supply uncertainty seen in 2022 may have reminded both buyers and sellers of the importance of long-term contracts to ensure stable price prospects and limit short-term price volatility.In terms of contract volume,large contracts(over 4 bcm/yr)accounted for 24%in 2022.Medium contracts

181、(2-4 bcm/yr)accounted for 35%and small contracts(2 bcm/yr)41%in 2022.In 2023,41%of the contracts were small contracts,and 52%were large contracts.Since 2022,the share of large contracts among contracts where the portfolio player is the buyer has been higher than 40%,indicating a tendency for portfol

182、io players to take risks to secure contract volumes.3 This does not take into account the amount of supply to Europe by portfolio players.Natural Gas Supply Security in Korea Reducing Europes reliance on Russian natural gas Insights from the 2022 Gas Supply Shock and the impact on the global liquefi

183、ed natural gas market PAGE|26 I EA.CC BY 4.0.Contract volumes concluded by contractual element,2018-2023 IEA.CC BY 4.0.Note:The label 2023 represents the volumes signed by the end of December 2023.Destination flexibility is only for indicative purposes,assumed in the absence of a clear source of inf

184、ormation.Source:IEA analysis based on ICIS(2023),ICIS LNG Edge.In 2022,the share of destination-free contracts increased compared to 2020 and 2021,accounting for about half of the new contract volume.The majority of destination-free contracts were related to projects in North America,with buyers mai

185、nly from portfolio players and Europe.In contrast,the majority of destination-fixed contract volumes came from Asian buyers,with China accounting for over 40%of these contracts.In 2023,the share of destination-free contracts was around 30%of the contract volume.When including pre-FID contracts,the s

186、hare of destination-free contracts was over 40%.For destination-free contracts,the majority were related to projects in North America,while Asian buyers accounted for the majority of destination-fixed contracts,continuing the trend from 2022.Portfolio players Portfolio players play an important role

187、 in meeting buyers growing needs for volume and supply source flexibility.They procure a mix of LNG supplies from different origins and resell them to customers to meet demand through term and spot contracts.The role of portfolio players has once again increased significantly in recent years.In volu

188、me terms,the share of contracts procured by portfolio players in total LNG contracts rose from 26%in 2016 to over 40%in 2022 and remained at the same level in 2023.The average duration of new purchase contracts concluded by portfolio players increased from 5 years in 2017 to over 15 years in 2022.Th

189、e share of large contracts(over 4 bcm/yr)increased from 30%in 2018 and accounted for about 50%of contracts concluded by portfolio players in 2022.In 2023,the average contract length of contracts where the portfolio player was the buyer was 9 years,and the share of large contracts accounted for about

190、 50%of all contracts concluded by portfolio players.Natural Gas Supply Security in Korea Reducing Europes reliance on Russian natural gas Insights from the 2022 Gas Supply Shock and the impact on the global liquefied natural gas market PAGE|27 I EA.CC BY 4.0.The proportion of contracts where portfol

191、io players are sellers fell from 50%of total contract volumes in 2017 to just 11%in 2022.In 2023,the volume of contracts where portfolio players were sellers was still low at around 11%.This might be reflective of portfolio players preferences under current market conditions to sell their LNG volume

192、s on the spot market rather than sign term contracts.Portfolio players contract ratios sales offtake as a percentage of purchase obligations,a metric of relative exposure to certain types of market risk declined to 52%in 2022 from 71%in 2017.This means that the share of their purchase obligations no

193、t covered by term sales contracts or their net open positions increased from 29%to 48%between 2017 and 2022.4 Based on existing contracts,their net open position is set to increase to an average of close to 52%between 2023 and 2026.The growing net open position of portfolio players will contribute t

194、o market stabilisation through increased trading flexibility with regard to contract duration and volume.LNG portfolio players contractual position and contracted ratio,2018-2026 IEA.CC BY 4.0.Note:This graph represents the volumes signed by the end of December 2023.Source:IEA analysis based on ICIS

195、(2023),ICIS LNG Edge.Medium-term outlook for Europes natural gas balance The gas supply shock triggered by Russia in 2022 reinforced the structural drivers accelerating the decline in European gas demand over the medium term.Natural 4 Sales contracts exclude various hedging arrangements and do not n

196、ecessarily capture the downstream sales directly performed by portfolio players.Natural Gas Supply Security in Korea Reducing Europes reliance on Russian natural gas Insights from the 2022 Gas Supply Shock and the impact on the global liquefied natural gas market PAGE|28 I EA.CC BY 4.0.gas demand in

197、 OECD Europe is expected to decline by 6%(or 32 bcm)between 2022 and 2026,standing at nearly 20%(or 116 bcm)below the 2021 peak by 2026.A relatively high gas price environment is set to weigh on demand recovery in industry,while a more rapid deployment of renewables is expected to reduce the call on

198、 gas-fired power plants.Nevertheless,the flexibility provided by natural gas will remain crucial for ensuring the security of energy and electricity supply in the medium term.In the residential and commercial sectors,energy efficiency gains,together with the more rapid installation of heat pumps,are

199、 set to reduce gas use during the forecast period.Our forecasts assume that more than half of the industrial gas demand lost in 2022 will not be recovered over the medium term,as the relatively high gas price environment weighs on the prospects of the gas-intensive European industries.The relocation

200、 of European industries to other regions with a structurally lower cost of gas supply remains a major downside risk to industrial gas demand in Europe.As highlighted in a recent survey,almost a third of Germanys industrial companies are relocating capacity abroad or restricting production at home,or

201、 are planning to do so,in light of the impacts of the 2022 energy crisis.Expected change in natural gas demand by sector in OECD Europe,2022-2026 IEA.CC BY 4.0.Source:IEA(2023),Medium-Term Gas Report 2023.Europes natural gas production is forecast to drop by 7%(or close to 15 bcm/yr)by 2026 compared

202、 with 2022,as the increase in natural gas output in Eastern European markets will not be sufficient to offset the declines projected in Northwest Europe.Natural Gas Supply Security in Korea Reducing Europes reliance on Russian natural gas Insights from the 2022 Gas Supply Shock and the impact on the

203、 global liquefied natural gas market PAGE|29 I EA.CC BY 4.0.Norway is set to remain the backbone of European gas production,with the countrys natural gas output expected to remain broadly flat and average 125 bcm/yr between 2023 and 2026.In the United Kingdom,ageing gas fields in the North Sea are e

204、xpected to reduce the countrys natural gas output by over 30%(or more than 10 bcm)by 2026 compared with 2022.The governments plan,announced in July 2023,to grant more than 100 new licences for oil and gas production in the North Sea could provide upside potential to the current forecast.In the Nethe

205、rlands,the giant Groningen field was closed(as scheduled)on 1 October 2023,marking the end of its phase-out,which started in 2018 due to earthquakes caused by production from the field.Production from small fields is expected to continue to decline over the forecast period,leading to an overall decr

206、ease of over 40%(almost 10 bcm)in Dutch natural gas output by 2026 compared with 2022.In Trkiye,the giant Sakarya gas field was commissioned in April 2023.Natural gas production is expected to ramp up to 3.6 bcm/yr during the first phase in 2023-25,later growing to around 15 bcm/yr during the second

207、 phase after 2026.Natural gas production in OECD Europe,2019-2026 IEA.CC BY 4.0.Source:IEA(2023),Medium-Term Gas Report 2023.Pipeline imports from Azerbaijan and North Africa into Europe are expected to remain broadly flat through the 2022-26 period.The future of Russian piped gas deliveries to Euro

208、pe is a key uncertainty in our forecast.Russian piped gas deliveries almost halved in 2023 compared to 2022,falling to 45 bcm.Russias gas transit contract with Ukraine is set to expire at the end of 2024.Ukraines energy minister has ruled out the possibility of extending the contract,following Natur

209、al Gas Supply Security in Korea Reducing Europes reliance on Russian natural gas Insights from the 2022 Gas Supply Shock and the impact on the global liquefied natural gas market PAGE|30 I EA.CC BY 4.0.Russias invasion of the country.Hence,our base forecast assumes that only TurkStream string 2(15.7

210、5 bcm/yr)will supply Russian piped gas to the European Union starting in 2025.While short-term capacity booking options might continue to be available along the Ukrainian transit route for European importers of Russian piped gas,this upside potential is not included in our baseline forecast.LNG will

211、 continue to play a key role in Europes natural gas supply and is expected to account for a relatively stable 34%share of the regions natural gas demand through 2026.In absolute terms,Europes LNG imports are expected to average around 166 bcm through the forecast,remaining close to the levels reache

212、d in 2022.Natural Gas Supply Security in Korea Recent developments in the Korean Insights from the 2022 Gas Supply Shock gas market and its outlook PAGE|31 I EA.CC BY 4.0.Recent developments in the Korean gas market and its outlook Current situation of the Korean gas market Natural gas industry stat

213、us The natural gas industry in Korea is largely divided into the wholesale and retail sectors.The wholesale sector is managed by the Korea Gas Corporation(KOGAS),while the retail sector is handled by regional city gas companies.KOGAS is a market-oriented,state-owned enterprise,and the government is

214、the largest shareholder.It holds a dominant position across the domestic gas supply chain,from LNG imports to distribution and the wholesale market.KOGAS imports natural gas in the form of LNG from overseas and supplies it to high-demand consumers,such as power producers,industrial users and city ga

215、s companies,through national pipelines and tank lorries.Natural gas market structure in Korea Source:KEEI(2023),as modified by the IEA.The 34 city gas companies each hold exclusive selling rights in their respective regions and all purchase their natural gas from KOGAS.They then deliver it to their

216、household,commercial and industrial consumers through regional retail pipelines.Large-scale consumers,including power producers and industrial users,have the option to directly import LNG once they meet certain facility standards and registration requirements.These direct importers are only allowed

217、to import natural gas for their own consumption and are prohibited from selling the imported LNG within the domestic market.Natural Gas Supply Security in Korea Recent developments in the Korean Insights from the 2022 Gas Supply Shock gas market and its outlook PAGE|32 I EA.CC BY 4.0.Natural gas sup

218、ply status As of 2022,Korea ranked as the worlds third-largest LNG importer following Japan and China and accounting for 12%of global imports.The countrys domestic natural gas production,primarily from the Donghae-1 gas field,contributed less than 1%to total consumption before the field was depleted

219、 in 2021.Natural gas imports and production in Korea,2017-2022 IEA.CC BY 4.0.Source:IEA analysis based on KEEI(2023),Monthly Energy Statistics.Koreas reliance on LNG imports has been increasing over the years,rising from 2.23 million tonnes in 1990 to 46.39 million tonnes in 2022.The country began i

220、mporting LNG from Indonesia in 1986 and has since diversified its sources to include regions like the Middle East,Asia Pacific,North America and Europe.LNG imports by source country,1994-2022 IEA.CC BY 4.0.Source:IEA analysis based on KEEI(2023),Monthly Energy Statistics.Natural Gas Supply Security

221、in Korea Recent developments in the Korean Insights from the 2022 Gas Supply Shock gas market and its outlook PAGE|33 I EA.CC BY 4.0.Korea is actively diversifying its LNG import sources to mitigate the risk of supply disruptions from regional conflicts and production challenges.In 2022,the primary

222、LNG suppliers to Korea were Australia(25.1%),Qatar(21.0%),the United States(12.4%)and Malaysia(11.9%).This indicates a notable shift in reducing reliance on Middle Eastern imports while increasing imports from Australia and the United States.Share of Liquefied Natural Gas imports by country,2022 Exp

223、ort country Australia Qatar United States Malaysia Oman Indonesia Others Share of imports(%)25.1 21 12.4 11.9 10.3 7 8.2 Source:KEEI(2023).Direct LNG importers mainly private power and industrial companies have significantly expanded their operations for power generation and industrial use.From 2006

224、,the proportion of direct LNG imports gradually increased,rising from around 4%in 2006 to approximately 20%in 2020.However,this growth trend has slowed recently due to escalating LNG prices,influenced by changes in the global landscape.Notably,after the second half of 2021,global spot LNG prices sur

225、ged due to various factors and reached unprecedented levels following the Russian invasion of Ukraine in February 2022.Proportion of direct Liquefied Natural Gas imports,2006-2022 Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 Share(%)4.3 4.3 3.1 5.4 9.2 5.1 4.5 3.6 3.7 Year 2015 2016 2017 2018 2

226、019 2020 2021 2022 Share(%)5.4 6.3 12.7 14.0 18.4 22.9 18.8 15.9 Source:Private LNG Industry Association(2023).Although spot prices briefly stabilised,they spiked again in late August 2022,driven by the halt in LNG supplies through the Nord Stream pipeline and exacerbated by heightened tensions aris

227、ing from Russias reaction to Western sanctions.Spot prices later moderated,influenced by early winter stockpiling,reduced demand due to high prices,emergency demand reduction measures by countries and milder weather conditions.Despite these adjustments,the recent trends indicate a decline in the pro

228、portion of direct LNG imports.Natural Gas Supply Security in Korea Recent developments in the Korean Insights from the 2022 Gas Supply Shock gas market and its outlook PAGE|34 I EA.CC BY 4.0.Natural gas consumption trends In response to the oil crises of 1973 and 1979,Korea recognised the vital impo

229、rtance of energy security and began introducing natural gas as an alternative to oil.Due to its environmental benefits and ease of use,natural gas quickly became a popular choice for residential fuel.Advancements in power generation technologies and supportive distribution policies also significantl

230、y contributed to its adoption.Primary energy demand trend in Korea,1990-2022 IEA.CC BY 4.0.Source:IEA analysis based on KEEI(2022),Yearbook of Energy Statistics.As a result,the proportion of natural gas in Koreas primary energy supply increased from 3.3%in 1990 to 19.5%in 2022.The domestic demand fo

231、r natural gas has seen an average annual growth rate of 10.0%,escalating from 1.61 million tonnes in 1987,the year after its introduction,to 45.40 million tonnes in 2022.Domestic natural gas demand and average growth,1987-2022 Demand(10 000 tonnes)Average annual growth rate(%)1987 1997 2002 2009 201

232、3 2015 2018 2021 2022 1987-2002 2003-2022 1987-2022 City gas 7 577 1 119 1 563 1 995 1 727 2 137 220 2 231 40.3 3.3 17.9 Power genera-tion 154 538 651 1 041 2 013 1 609 2 085 2 337 2 309 10.1 6.9 8.0 Total 161 1 115 1 770 2 604 4 008 3 336 4 222 4 573 4 540 17.3 4.9 10.0 Source:MOTIE(2023).Natural G

233、as Supply Security in Korea Recent developments in the Korean Insights from the 2022 Gas Supply Shock gas market and its outlook PAGE|35 I EA.CC BY 4.0.Domestic natural gas demand trends,1992-2022 IEA.CC BY 4.0.Source:IEA analysis based on MOTIE(2023),15th Plan for Long-Term Natural Gas Demand and S

234、upply.Demand for city gas In Korea,the demand for natural gas is primarily split into two sectors:city gas and power generation.City gas demand has grown significantly,increasing from 70 000 tonnes in 1987 to 22.31 million tonnes in 2022.Its share of total natural gas consumption has also risen,from

235、 4%in 1987 to 49%in 2022.During the 1990s,city gas demand surged,particularly in metropolitan areas and major cities,driven by the widespread distribution of gas for heating and cooking.This led to a marked increase in domestic consumption and,consequently,a rapid rise in overall natural gas usage.F

236、rom 1987 to 2002,the annual average growth rate of city gas consumption was a remarkable 40.3%.City gas consumption in Korea,1990-2022 IEA.CC BY 4.0.Source:IEA analysis based on KEEI(2023),Monthly Energy Statistics.Natural Gas Supply Security in Korea Recent developments in the Korean Insights from

237、the 2022 Gas Supply Shock gas market and its outlook PAGE|36 I EA.CC BY 4.0.However,as the 2000s began,the expansion of residential city gas distribution reached maturity,leading to a slowdown in the growth of domestic demand.Nevertheless,with high oil prices enhancing the price competitiveness of g

238、as and environmental policies favouring cleaner energy sources,there was a noticeable increase in gas demand in the industrial and commercial sectors.From 2003 to 2022,the growth rate of city gas consumption significantly decelerated to an annual average of 3.3%.City gas demand,initially driven by i

239、nfrastructure development like pipeline networks,has now entered a mature stage.In this stage,consumption remains stable,with fluctuations influenced by factors such as temperature and economic conditions.In 2022,while the industrial consumption of city gas remained at the previous years level,there

240、 was a noticeable increase in building consumption,leading to an overall rise of 3.6%compared to the previous year.The modest growth in industrial consumption was impacted by global economic slowdowns and increased raw material costs.Notably,the petrochemical and machinery sectors saw a rise in gas

241、usage,while the steel and transportation equipment sectors experienced a decline.The growth in building consumption of city gas was attributed to temperature fluctuations and the easing of social distancing measures,resulting in higher demand for both residential and commercial purposes.Demand for g

242、as in power generation The demand for natural gas in power generation in Korea has seen a significant increase,rising from 1.54 million tonnes in 1987 to 23.09 million tonnes in 2022.During this period,the share of gas used for power generation in total natural gas demand shifted from 96%in 1987 to

243、51%in 2022.This consistent growth in demand has been influenced by several factors,including the requirement for clean fuels in metropolitan power plants,the construction of combined heat and power plants for district heating in new cities,economic growth leading to increased electricity demand and

244、the expansion of natural gas power plants in the metropolitan regions.Natural Gas Supply Security in Korea Recent developments in the Korean Insights from the 2022 Gas Supply Shock gas market and its outlook PAGE|37 I EA.CC BY 4.0.Power mix and share of natural gas,2017-2022 IEA.CC BY 4.0.Source:IEA

245、 analysis based on Korea Electric Power Corporation(2023),Monthly Report on Major Electric Power Statistics.Particularly notable was the period up until the early 2010s,which was marked by a shortage of baseload power generation,such as nuclear and coal.This led to a significant drop in the capacity

246、 reserve margin to single digits and a consequent rapid increase in natural gas power,which primarily manages peak loads.However,this trend experienced a downturn post-2013,attributed to a slowdown in electricity demand and an increase in baseload power generation capacity.In 2016,the trend saw anot

247、her upward shift,driven by a decrease in nuclear power utilisation,tighter restrictions on coal power generation and lower winter temperatures.The demand for gas in power generation now experiences significant annual fluctuations,influenced by the completion of baseload power plants,the rise of rene

248、wable energy and changes in electricity demand.These fluctuations are expected to continue in the future.Nuclear power generation is projected to increase,with new facilities coming online and higher utilisation rates.For instance,Shin Hanul Unit 1,with a capacity of 1 400 MW,began commercial operat

249、ions in December 2022,contributing to an increase in nuclear capacity.Additionally,a slight increase in the nuclear power plant utilisation rate is anticipated to add to the growth in nuclear generation.Meanwhile,renewable power generation,primarily driven by solar energy,has grown rapidly but is es

250、timated to have increased by only 10%in 2023 compared to the previous year.This slowdown can be linked to factors such as a reduced Renewable Portfolio Standards mandatory supply ratio,stricter local setback regulations and rising interest rates,all of which are expected to limit the growth of solar

251、 power generation in the near term.Natural Gas Supply Security in Korea Recent developments in the Korean Insights from the 2022 Gas Supply Shock gas market and its outlook PAGE|38 I EA.CC BY 4.0.Despite ongoing expansions in capacity,coal power generation is anticipated to decline,primarily due to

252、transmission line limitations on the east coast and operational challenges arising from the increasing share of renewable energy.While older coal power plants are progressively being retired,new units have been added,such as Gangneung Anin Unit 1 in October 2022,Gangneung Anin Unit 2 in May 2023 and

253、 Samcheok Thermal Unit 1 in October 2023.Nevertheless,a significant number of these new,large-scale power plants are located on the east coast.The existing transmission lines that link these plants to the high-demand areas in the metropolitan regions are unable to fully support their output.Addition

254、ally,the expanding presence of renewable energy sources,particularly solar power,is expected to further challenge the generation of coal.The variability and unpredictability associated with the growth of renewable energy present additional hurdles for coal power generation,which struggles to rapidly

255、 adapt to fluctuations in power supply and demand.Given these factors,gas generation,which typically handles peak loads,is expected to remain relatively stable at the annual level as overall power generation from nuclear,coal and renewable sources is expected to remain comparable to the levels recor

256、ded in 2022.Thermal unit cost and System Marginal Price Source:Electric Power Statistics Information System(2023),Market Review,as modified by the IEA.Currently,gas power generation accounts for approximately 30%of Koreas power mix.In the first quarter of 2023,the cost per thermal unit for gas power

257、 generation was reported at KRW 142 600(Korea won)/Gcal.This rate was 2.6 times higher than that for coal and 55 times more than nuclear power.Gas power generation typically determines about 90%of the system marginal price(SMP)in Koreas electricity wholesale market.The ongoing Russian invasion of Uk

258、raine and other tensions have significantly increased fuel costs.In the first quarter of 2023,the average thermal unit cost of LNG saw a 38%increase Natural Gas Supply Security in Korea Recent developments in the Korean Insights from the 2022 Gas Supply Shock gas market and its outlook PAGE|39 I EA.

259、CC BY pared to the same period in the previous year,reaching KRW 142 600/Gcal.Consequently,the SMP experienced a 31.3%rise from KRW 180.46/kWh in the previous year to KRW 236.99/kWh.Thermal unit cost by fuel type LNG Petroleum Coal(domestic)Bituminous coal Nuclear Average thermal unit cost(KRW/Gcal)

260、Q1 2022 103 226 123 205 33 210 38 527 2 565 97 709 Q1 2023 142 400 145 358 42 960 54 086 2 560 137 957 Change+38%+18%+29%+40%-0.2%+41%Source:Korea Power Exchange(2023).To address the economic uncertainties caused by the increasing SMP,the Korean government has introduced a SMP cap.This cap is activa

261、ted when the average SMP over the previous 3 months ranks in the top 10%of the average SMP for the past decade.The cap is set at 1.5 times the average SMP of the last 10 years.This mechanism cannot be applied for more than three consecutive months and is scheduled to be phased out after 1 year.SMP d

262、etermination ratio by fuel type LNG Bituminous coal Petroleum Anthracite coal Q1 2022 90%9%1%0%Q1 2023 89%5%6%0%Change-1 pp-4 pp+5 pp-Note:pp=percentage point.Source:Korea Power Exchange(2023).Natural gas supply infrastructure Liquefied natural gas terminals Korea features a comprehensive infrastruc

263、ture for natural gas,encompassing seven operational LNG terminals with a combined capacity of 14.09 million kilolitres.KOGAS manages the majority of these facilities,operating five LNG terminals in Pyeongtaek,Incheon,Tongyeong,Samcheok and Jeju.These KOGAS terminals have a total storage capacity of

264、12.16 million kilolitres.Additionally,POSCO,a private entity,owns an LNG terminal in Gwangyang,which has a capacity of Natural Gas Supply Security in Korea Recent developments in the Korean Insights from the 2022 Gas Supply Shock gas market and its outlook PAGE|40 I EA.CC BY 4.0.0.8 million kilolitr

265、es.The Boryeong terminal,with a capacity of 1.20 million kilolitres,is operated under a joint venture between GS Energy and SK E&S.Liquefied Natural Gas terminals in Korea Source:IEA(2023),Korea Natural Gas Security Policy.Natural Gas Supply Security in Korea Recent developments in the Korean Insigh

266、ts from the 2022 Gas Supply Shock gas market and its outlook PAGE|41 I EA.CC BY 4.0.Domestic LNG terminal operation status Company Location Operation start date Site area(km2)Storage tank capacity(10 000 kl)Regasification and transmission facilities(tonnes/h)KOGAS Pyeongtaek November 1986 1.3 336 4

267、950 Incheon January 1996 1.4 348 6 270 Tongyeong September 2002 1.1 262 3 030 Samcheok July 2014 0.9 261 1 320 Jeju October 2019 2.3 9 120 POSCO Energy Gwangyang July 2005 0.1 73 810 Boryeong LNG Terminal Co.Boryeong January 2017 0.1 120 1 230 Note:Information as of April 2023.Sources:KOGAS,POSCO En

268、ergy and Boryeong LNG Terminal Co.Korea is also actively enhancing its LNG infrastructure,targeting a storage capacity of 19.98 million kilolitres by 2036.KOGAS is expanding its Dangjin No.5 Terminal,which will add 2.7 million kilolitres of storage capacity by 2030.In addition,private companies are

269、expanding their storage capacity in Boryeong,Ulsan,Gwangyang and Tongyeong,which will add 2.66 million kilolitres by 2026.Pipeline facilities Koreas natural gas pipeline network,under the exclusive management of KOGAS,incorporates pipelines that link individual self-consumption facilities to the mai

270、n network.These connecting pipelines are constructed and funded by the facility owners themselves.As of January 2023,KOGAS operated a main pipeline system stretching over 5 027 kilometres and managed 425 supply management stations.These stations include various pressure and block stations,along with

271、 valves,that are integral to the networks operation.Major direct LNG importers,such as POSCO,GS Energy,SK E&S,and Korea Midland Power,primarily import LNG through private terminals.They lease the main pipeline network from KOGAS for distribution purposes,complying with the regulated third-party acce

272、ss rule.Furthermore,according to the 15th Long-Term Natural Gas Supply Plan,there are plans to expand the network.By 2036,the main pipeline is planned to be extended to approximately 5 840 kilometres.Natural Gas Supply Security in Korea Recent developments in the Korean Insights from the 2022 Gas Su

273、pply Shock gas market and its outlook PAGE|42 I EA.CC BY 4.0.Recent institutional changes The individual tariff plan is a system in which KOGAS applies individual tariffs to each plant,instead of applying the same average tariff to all of the power plants to which KOGAS supplies natural gas.Previous

274、ly,KOGAS had averaged the prices of LNG under its import contracts,applying the same price to all power plants under the average tariff plan.Since 1 January 2022,the individual tariff plan has been applied to new power plants and plants whose existing contracts with KOGAS have ended.These plants can

275、 choose between direct imports or the individual tariff plan.Since 2017,the proportion of direct imports of natural gas for power generation has significantly increased,necessitating improvements to the existing average tariff plan to manage national supply effectively and establish a fair and compe

276、titive structure among power companies.Direct importers are allowed to choose the more favourable pricing system based on global market conditions,which had been a constraint on fair competition between companies using direct imports and those under the average tariff plan.The government expects tha

277、t the introduction of the individual tariff plan for power generation will enhance the efficiency of the gas import market and strengthen fair competition within the electricity market.By allowing power companies to choose between direct imports and the individual tariff plan,the countrys overall LN

278、G import costs are expected to decrease.This cost reduction is expected to lead to increased competition among power companies and reduce fuel costs,which will in turn lower the power purchase costs for Korea Electric Power Corporation and ultimately reduce electricity bills for consumers.Moreover,w

279、hile the volume of direct imports is challenging to manage on a national level,the volume under the individual tariff plan can be managed collectively by KOGAS.This improved management is expected to enhance the countrys ability to respond to national emergencies,such as sudden increases in power de

280、mand.Natural Gas Supply Security in Korea Recent developments in the Korean Insights from the 2022 Gas Supply Shock gas market and its outlook PAGE|43 I EA.CC BY 4.0.Introduction of individual tariff plans for power plants Source:KEEI(2023),Ministry of Trade,Industry and Energy approves individual r

281、ate system for natural gas power generation,as modified by the IEA.Korean gas market outlook Gas demand outlook In April 2023,the Korean government released the 15th Long-Term Natural Gas Supply and Demand Plan with natural gas demand outlooks from 2023 to 2036,reflecting the new governments energy

282、policy direction.The 15th plan diverges from the projections of the 13th and 14th plans,which anticipated a long-term increase in natural gas demand in line with the previous government administrations policy of reducing reliance on nuclear power and coal.Instead,the 15th plan indicates a long-term

283、decrease in natural gas demand,mainly due to decreases in natural gas demand for power generation.Meanwhile,it also suggests the potential for variations in demand contingent upon advancements in nuclear power expansion,the adoption of new and renewable energy sources and the pace of implementation

284、of hydrogen co-fired power generation.Natural Gas Supply Security in Korea Recent developments in the Korean Insights from the 2022 Gas Supply Shock gas market and its outlook PAGE|44 I EA.CC BY 4.0.Natural gas demand outlooks from national plans IEA.CC BY 4.0.Sources:IEA analysis based on MOTIE(201

285、8),13th Plan for Long-term Natural Gas Supply and Demand;MOTIE(2021),14th Plan for Long-Term Natural Gas Supply and Demand.The plan provides two distinct outlooks,comprising a baseline outlook(base)and an alternative outlook(high),which takes into account demand volatility.In terms of utilisation,th

286、e outlooks are mainly categorised into applications for city gas and power generation.According to the base outlook,the anticipated decline in domestic natural gas demand is projected to average 1.38%annually from 2023 to 2036,starting from 45.09 million tonnes.This decline is primarily attributed t

287、o the diminishing demand for power generation.Meanwhile,the demand for natural gas in city gas is expected to rise,driven by industrial usage,at an average annual growth rate of 1.39%until 2036.In contrast,natural gas demand for power generation is forecast to decrease at an average annual rate of 5

288、.42%over the same period,reaching only 11.09 million tonnes in 2036 merely half of the demand recorded in 2023.Base outlook of the 15th Natural Gas Supply and Demand Plan Year City gas Power generation Total Residential Industry Subtotal(10 000 tonnes)2023 1 261 959 2 220 2 289 4 509 2030 1 308 1 18

289、6 2 494 1 656 4 150 2036 1 313 1 344 2 657 1 109 3 766 Average annual growth rate 0.31%2.63%1.39%-5.42%-1.38%Notes:“Residential”indicates use for residential,general,commercial heating,HVAC,and combined heat and power,etc.“Industry”refers to use for industry and transport.Source:MOTIE(2023),15th Pla

290、n for Long-term Natural Gas Supply and Demand.Natural Gas Supply Security in Korea Recent developments in the Korean Insights from the 2022 Gas Supply Shock gas market and its outlook PAGE|45 I EA.CC BY 4.0.The alternative outlook considers the possibility of an increase in gas demand based on fluct

291、uations in the economic growth rate,temperature,relative pricing and the utilisation of base power generation.Particularly,the gas demand for power generation is subject to variations depending on the pace of nuclear power expansion,the growth of renewable energy and the implementation of hydrogen c

292、o-fired power generation,making the potential for change relatively high.Alternative outlook of the 15th Natural Gas Supply and Demand Plan Year City gas Power generation Total Residential Industry Subtotal(10 000 tonnes)2023 1 275 968 2 243 2 419 4 662 2030 1 420 1 281 2 701 2 178 4 879 2036 1 453

293、1 460 2 913 1 667 4 580 Average annual growth rate 1.01%3.21%2.03%-2.82%-0.14%Notes:“Residential”indicates use for residential,general,commercial heating,HVAC,and combined heat and power,etc.“Industry”refers to use for industry and transport.Source:MOTIE(2023),15th Plan for Long-term Natural Gas Sup

294、ply and Demand.The alternative demand projection for city gas in 2036 is 29.13 million tonnes,approximately 10%higher than the baseline demand forecast of 26.57 million tonnes,representing an increase of 2.56 million tonnes.Additionally,the alternative demand projection for power generation in 2036

295、is 16.67 million tonnes,reflecting a 50%increase compared to the baseline demand forecast of 11.09 million tonnes,with a rise of 5.58 million tonnes.Nevertheless,the alternative outlook,like the baseline demand projection,still anticipates a long-term decrease in gas demand due to decreases in natur

296、al gas demand for power generation.Over the period from 2023 to 2036,domestic natural gas demand is expected to decrease at an average annual rate of 0.14%,reaching 45.8 million tonnes in 2036,down from 46.62 million tonnes in 2023.Natural Gas Supply Security in Korea Recent developments in the Kore

297、an Insights from the 2022 Gas Supply Shock gas market and its outlook PAGE|46 I EA.CC BY 4.0.Power mix outlook of the 10th Basic Plan for Long-term Electricity Supply and Demand,2021-2036 IEA.CC BY 4.0.Source:IEA analysis based on MOTIE(2022),10th Basic Plan for Long-Term Electricity Supply and Dema

298、nd.The anticipated long-term decrease in natural gas demand for power generation is based on the 10th Basic Plan for Long-Term Electricity Supply and Demand announced prior to the 15th Long-Term Natural Gas Supply Plan.According to the 10th Plan,LNG is expected to be maintained at a certain level of

299、 power generation in the medium term,following the replacement of ageing coal-fired power plants.However,it is anticipated that LNG generation will decrease from 142.4 TWh in 2030 to 62.3 TWh in 2036.During the same period,the share of power generation is expected to decrease from 22.9%to 9.3%,influ

300、enced by factors such as the continued operation of nuclear power plants and the expansion of renewable energy.Key issues in the mid-to long-term gas demand outlook The uncertainty in gas demand for power generation is a prominent issue in the mid-to long-term domestic gas demand forecast,as highlig

301、hted by the disparity between the two perspectives presented in the 15th Long-Term Natural Gas Supply and Demand Plan.Gas power generation serves as a flexible resource in the domestic electricity market,and the expansion of carbon-free power sources to achieve greenhouse gas reduction introduces va

302、rious scenarios that can result in volatility in gas power generation.This volatility underscores the complexity and challenges associated with forecasting gas demand for electricity in the evolving landscape of energy production and environmental goals.The 10th Basic Plan for Electricity Supply and

303、 Demand is based on an active utilisation of nuclear power,which includes the ongoing operation of existing nuclear power plants and the completion of new ones.The plan envisions an increase in installed nuclear power capacity from 26.1 GW in 2023 to 28.9 GW in Natural Gas Supply Security in Korea R

304、ecent developments in the Korean Insights from the 2022 Gas Supply Shock gas market and its outlook PAGE|47 I EA.CC BY 4.0.2030 and further to 31.7 GW in 2036,achieved through the completion of six new nuclear power plants and the continued operation of ten existing ones.The share of nuclear power g

305、eneration is projected to rise from 23.4%in 2018 to 32.4%in 2030 and 34.6%in 2036.Nonetheless,it cannot be ruled out that the expansion of nuclear power plant facilities may be delayed depending on the progress of the continued operation of nuclear power plants or the construction of new nuclear pow

306、er plants.In response to this,the amount of LNG power generation used as a flexible power source is also subject to change.It is interesting to note the emphasis on hydrogen power generation in the 10th Basic Plan for Electricity Supply and Demand,especially as part of efforts to reduce greenhouse g

307、ases.The integration of hydrogen into LNG combined-cycle generators is a significant step,and the gradual increase in the ratio of hydrogen in these generators indicates a commitment to transitioning towards cleaner energy sources.The targets for hydrogen power generation to reach 6.1 TWh in 2030 an

308、d 26.5 TWh in 2036 highlight the scale and ambition of the plan.This signals a substantial investment in technology development and pilot projects by power generation companies.However,the success of the plan depends on several key factors,including the following:Hydrogen production base:Establishin

309、g a reliable and efficient hydrogen production base is crucial.This might involve scaling-up current production methods or investing in new,more sustainable hydrogen production technologies.Supply chain development:Creating a robust supply chain for hydrogen is essential to ensure a steady and consi

310、stent source of hydrogen for power generation.This involves transportation,storage and distribution infrastructure.Institutional foundation:The development of an institutional framework is necessary to regulate,monitor and support the growing hydrogen industry.This could involve creating policies,re

311、gulations and incentives to encourage the adoption of hydrogen power.In summary,while the plan outlines ambitious goals for hydrogen power generation,its success hinges on addressing the logistical and institutional challenges associated with scaling-up hydrogen production and integrating it into th

312、e existing energy infrastructure.It is a positive sign that power generation companies are actively involved in technology development and pilot projects,as this collaboration is crucial for the successful implementation of the plan.Natural Gas Supply Security in Korea Recent developments in the Kor

313、ean Insights from the 2022 Gas Supply Shock gas market and its outlook PAGE|48 I EA.CC BY 4.0.Gas supply outlook In Korea,traditional long-term contracts constituted over 80%of the total import volume until the mid-2010s.However,there has since been a shift towards short-term contracts,including spo

314、t contracts.The move towards greater flexibility and adaptability in energy procurement strategies reflects an understanding of the challenges posed by volatility and uncertainty,particularly in sectors like power generation.Trends in Korean term contracts,2012-2022 IEA.CC BY 4.0.Source:IEA analysis

315、 based on S&P Global Commodity Insights,2024 by S&P Global Inc.Since the mid-2020s,Korea has entered a phase where existing long-term contracts are gradually nearing their conclusion.Consequently,there is a need to consider negotiating new contracts to replace those set to expire,with the anticipati

316、on of future demand.However,given the ongoing volatility in future gas demand and the current constrained conditions in the international LNG market,domestic businesses are highly likely to procure gas through short-to medium-term contracts or spot transactions to address their demand.Natural Gas Su

317、pply Security in Korea Recent developments in the Korean Insights from the 2022 Gas Supply Shock gas market and its outlook PAGE|49 I EA.CC BY 4.0.Contracted LNG supply by contract type versus LNG demand in Korea IEA.CC BY 4.0.Sources:IEA analysis based on MOTIE(2023),15th Plan for Long-term Natural

318、 Gas Supply and Demand;S&P Global Commodity Insights,2024 by S&P Global Inc.Mid-to long-term government policy direction Since declaring carbon neutrality in October 2020,Korea has continued its policy efforts to achieve carbon neutrality.In September 2021,the Basic Law on Carbon Neutrality Green Gr

319、owth for Climate Crisis Response was enacted,legally committing to reduce the countrys greenhouse gas emissions by over 35%from their 2018 levels by 2030.The implementing decree subsequently raised the national reduction target to 40%compared to 2018,exceeding the initial nationally determined contr

320、ibution.In December 2021,the upgraded 2030 National Greenhouse Gas Target was formally submitted to the United Nations Framework Convention on Climate Change.Additionally,the government has been working on establishing institutional foundations for carbon neutrality,including the announcement of the

321、 first National Carbon Neutrality Green Growth Basic Plan in April 2023.As part of these efforts,the role of gas is expected to diminish in the long term.However,based on the current national plans for electricity and natural gas,it appears that gas will continue to serve as a bridging resource for

322、a certain period.The governments policy direction for the gas market can be discerned through the 15th Long-Term Natural Gas Supply and Demand Plan.The plan outlines policy recommendations for natural gas imports,supply and demand management,and LNG infrastructure aligned with the previously analyse

323、d demand outlook.Natural Gas Supply Security in Korea Recent developments in the Korean Insights from the 2022 Gas Supply Shock gas market and its outlook PAGE|50 I EA.CC BY 4.0.Natural gas imports The natural gas procurement policy outlined in the 15th Long-Term Natural Gas Supply and Demand Plan p

324、laces a significant emphasis on creating solutions to ensure both supply and price stability.Specifically,the plan highlights the necessity of preparing for potential surges in spot prices and strives to enhance import competitiveness and negotiation power.To achieve these goals,the plan underscores

325、 the importance of collaboration between KOGAS and the private sector domestically,as well as fostering external co-operation with neighbouring countries.The policy recommendations for ensuring supply stability can be delineated in three key aspects.First is the continued emphasis on diversifying LN

326、G-importing countries and supply routes.The plan recommends expanding the acquisition of gas from companies with diversified sources while carefully evaluating imports from countries with a high risk of supply disruptions due to political and diplomatic uncertainties,as witnessed in recent cases of

327、price surges linked to events like the Russian invasion of Ukraine and geopolitical instability in the Middle East.Second,the plan encourages the diversification of contract durations to enhance flexibility in responding to domestic supply fluctuations.It underscores the importance of diversifying c

328、ontract portfolios,including long-term,short-term,medium-term and spot contracts.The plan particularly suggests actively utilising mid-term contracts during periods of elevated LNG market prices to mitigate the prolonged impact of high international market prices on the domestic market.Third,the pla

329、n proposes enhancing the co-operation systems with Koreas neighbouring countries.This involves expanding information exchange,engaging in joint purchasing initiatives and acquiring equity in LNG projects through collaboration with neighbouring countries such as China and Japan,both at the government

330、 and private levels.The policy alternatives for ensuring price stability in domestic LNG imports involve strategies to reduce unit import prices and manage the risks associated with international LNG price surges.The first strategy emphasises the importance of collaboration between KOGAS and the pri

331、vate sector to strengthen their negotiation power in determining gas purchase prices.With the expansion of direct imports and the increasing number of participants in the domestic gas market,joint purchasing initiatives between KOGAS and private direct importers could leverage collective bargaining

332、power to induce a reduction in domestic LNG import prices.The second strategy focuses on diversifying the spot contract price index,moving away from the current reliance on the natural gas price index.This shift aims to mitigate the risk of rising domestic import prices caused by surges in the Natur

333、al Gas Supply Security in Korea Recent developments in the Korean Insights from the 2022 Gas Supply Shock gas market and its outlook PAGE|51 I EA.CC BY 4.0.international natural gas spot price so that the domestic market becomes more resilient to sudden price fluctuations in the global LNG market.Key policy areas on natural gas imports in the 15th Long-Term Natural Gas Supply and Demand Plan Polic