Korea Gas CEO says U.S. LNG will undermine oil-linked pricing

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(Bloomberg; June 7) - Korea Gas Corp., the world's single biggest importer of liquefied natural gas, said U.S. policies will determine how much LNG the country exports and those shipments will undermine the 40-year-old oil-linked price mechanism used in Asia.

"There is good potential for the U.S and Canada to export LNG to Asia," CEO Choo Kang-Soo said June 7 in Kuala Lumpur, Malaysia, where he is attending an industry conference. "How much they can ship out will depend on the policy of the U.S. and also what American people think." Korea Gas already has signed up to buy an average 500 million cubic feet of gas a day from Cheniere Energy's proposed LNG export terminal in Louisiana, starting in 2017. The LNG price will be indexed to U.S. domestic gas prices.

Asia's LNG buyers, which account for more than 60 percent of global demand, are turning to North America because U.S. prices are tumbling amid record production driven by extraction from shale deposits. That's weakening the so-called Japan Crude Cocktail, the benchmark index used to price long-term LNG contracts across Asia. "More volumes from the U.S. will affect oil-linked gas pricing," Choo said. Western Canada is also preparing to export LNG, so "we have to see the overall picture." 

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