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Korea Gas Corp: Possible delay in stake sale to Shell

State-run Korea Gas Corp., or Kogas, is still in talks to sell a stake to Royal Dutch/Shell Group, but the decision is likely to be delayed, a Kogas official said at the beginning of this month.
Shel…

State-run Korea Gas Corp., or Kogas, is still in talks to sell a stake to Royal Dutch/Shell Group, but the decision is likely to be delayed, a Kogas official said at the beginning of this month. Shell wants to acquire a 15% equity stake, worth about US$ 400 million, on condition that Kogas signs a long-term liquefied natural gas purchasing agreement from a gas field in Sakhalin, in which Shell owns a stake, the official said. Kogas hopes to acquire as much as 5% of the Sakhalin gas field, the official added. Shell began producing oil off Sakhalin 2 in the summer of 1999 and plans to build a gas liquefaction plant to process and export gas. Kogas was hoping to conclude the deal with Shell by the end of this year, but it will likely be delayed due to difficulties in signing additional long-term LNG contracts due to South Korea“s ongoing gas industry restructuring, the official said. Due to these restructuring plans, Kogas does not have the authority to sign new LNG contracts at present, an official at the Ministry of Commerce, Industry and Energy, or Mocie, has said. The restructuring plan involves splitting Kogas“s import and wholesale operations into three entities this year and selling two of them to the private sector by end-2002. In order to split these operations, Kogas also has to divide current LNG contracts, some of which expire as late as 2024, another hindrance to signing new LNG contracts. Kogas has held a monopoly in importing and distributing natural gas in South Korea, but the restructuring plan will transfer the signing contract responsibility to the new import and wholesale companies. According to the Mocie official, South Korea will be able to sign new LNG purchasing contracts when the import and wholesale companies are sold off. Shell“s Seoul office declined to comment on the deal with Kogas.

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