OREANDA-NEWS. SK E&S (President & CEO Yu Jeong Joon) announced that the company set up a bridgehead for importing shale gas for the first time among Korean companies by signing a contract to use natural gas liquefying service provided by FLNG Liquefaction 3, LLC, which is a subsidiary of Freeport LNG Expansion L.P.

SK E&S is planning to import 2.2 million tons of shale gas per year starting 2019, using natural gas liquefaction facilities which are supposed to be built in Texas, USA by Freeport LNG.

This amount accounts for 6% of total annual LNG import in Korea and the contract is to import for 20 years. The total price is more than USD 30 billion, if the price is converted into the existing LNG average price.

Through this contract, SK group was able to build up various energy portfolios that cover oil, LNG, LPG, and shale gas, and Korea will be able to secure its foundation to become an oil producing nation without any resources.

This contract realized Chairman Chey Tae-won’s ‘Energy Powerhouse’ theory that energy reserves are the core competitiveness of a nation in the future, and to develop and to secure energy are the most important mission of an energy company.

North America has vast shale gas reserves. However, because of liquefaction facilities shortage, it is inevitable to secure LNG liquefaction facilities in the United States in order to import shale gas to Korea.

Even though almost 20 liquefying projects are being promoted in the United States, there is high probability of limiting the amount of exported shale gas, because of negative public opinion in exporting shale gas. Therefore, only few projects will be able to survive in the US market. Considering this situation, this contract made by SK E&S is very meaningful in that the company outcompeted global major energy companies.

From the early stage, SK E&S had focused on the shale gas of North America and made an effort to secure liquefaction facilities. However, the company was not able to achieve its goal because of global gigantic energy companies.

SK E&S is reviewing various measures to directly purchase shale gas that will be liquefied with liquefaction facilities of Freeport LNG.

The shale gas price in North America has decreased to \\$3-4/MMbtu because of production technology development. It is expected that its price will be lower than existing natural gas in spite of liquefaction and transportation.

This contract has its significance in that the company can import shale gas from North America with low price and expand its import line from Southeast Asia and Middle East to North America, which will enhance Korea’s energy supply stability.

Meanwhile, SK group’s holding company SK Holdings made a contribution in this contract for stable supply of energy. SK Holdings announced that it will issue a performance bond for the liquefaction service contract awarded by SK E&S.

Through this, SK E&S’s shale gas business will be able to gain its momentum to move forward.

Yoo Jung Joon, CEO of SK E&S, said, “As overseas resource development businesses need vast investment and are exposed to higher risk, the long-term huge resource investments require macroscopic and strategic perspective. Therefore, it is really hard to succeed without management’s rapid decision making and supports. With our strong spirit of challenge, we will make more efforts to achieve our company vision ‘Global Gas & Power Company’ as well as to reinforce Korea’s energy safety and to increase independent energy development rate.”