Natural Gas Supply Security in Korea: Insights from the 2022 Gas Supply Shock
Introduction
This report, commissioned by the Korea Energy Economics Institute (KEEI) and carried out jointly by the International Energy Agency (IEA) and KEEI, aims 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.
Key Findings
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Global Context:
- The Russian invasion of Ukraine on February 24, 2022, and the subsequent war led to a significant disruption in global energy security.
- The shock was exacerbated by a sharp decline in Russian pipeline natural gas supply to Europe, driven by European efforts to reduce reliance on Russian gas.
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Impact on European Gas Market:
- Before the war, Russia supplied over 50% of Europe's yearly gas imports.
- Russia's gas deliveries to Europe began declining ahead of the 2021/22 heating season, with pipeline exports falling by nearly 25% year on year.
- Gazprom implemented a rouble payment system, leading to unilateral cuts in supply to several EU countries and curtailed deliveries to Gazprom subsidiaries in Europe after they were placed under Russian sanctions.
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Liquefied Natural Gas (LNG) Market:
- The supply shock resulted in an energy crisis felt globally, with new LNG supplies and policy initiatives helping Europe navigate the crisis without supply interruptions.
- Gazprom reduced gas deliveries via Nord Stream to just 20% of the pipeline's capacity by mid-2022, leaving only three pipeline systems operational.
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End of Gas Interdependence:
- Europe is moving towards reducing its reliance on Russian gas, with the European Union committing to phase out Russian fossil fuel imports "as soon as possible."
- The REPowerEU package aims to reduce fossil fuel dependence on Russia to zero by 2027.
Recommendations
- Korea should diversify its natural gas sources to reduce dependency on any single supplier.
- Enhance domestic production capabilities and explore new LNG supply contracts.
- Strengthen energy market integration and resilience measures.
This summary highlights the key insights and findings from the report, focusing on the global context, impact on the European gas market, and the role of the LNG market in mitigating the supply shock.
