IEEFA – South Korea's LNG Overbuild, Nov 23

In response to the limited global supplies of liquefied natural gas (LNG) caused by Russia's invasion of Ukraine, South Korea is accelerating its efforts to build new LNG import terminals and storage facilities. This is aimed at enhancing the country's energy security and ability to manage supply and demand in a volatile LNG market post-invasion. However, the Institute for Energy Economics and Financial Analysis (IEEFA) warns that the rapid growth of proposed LNG import terminals presents a high risk of overinvestment. The government aims to reduce long-term natural gas demand by nearly 20% to meet climate targets, making the LNG market even more unpredictable. Additionally, South Korea already has low utilization rates for its existing LNG terminals, and the inefficient allocation of assets could further hinder their usage. Expanding the use of LNG in new applications may not effectively address climate targets. The estimated cost of South Korea's new LNG receiving terminals is around ₩11.3 trillion (US$8.7 billion), and there are plans to complete 11 LNG terminal projects by 2031, increasing national capacity. Proposed new LNG storage capacity would result in a 53% increase, despite existing storage facilities already meeting the government's target for peak demand season.