Warning lights are flashing over supply and inventories in the liquefied natural gas market as the military conflict between the United States and Iran shows signs of dragging on. With key shipping routes blocked and Europe stocking up for winter, competition to secure resources is intensifying — and early moves by Korean companies that locked in stakes in overseas gas fields are paying off.
Damage to major Middle Eastern pipelines and suspended navigation along shipping routes have continued as the U.S.-Iran conflict escalates, according to energy industry officials and foreign media reports on the 18th. The aftermath of an air strike on Qatar's Ras Laffan gas field, an extension of QatarEnergy's force majeure declaration on supply, and surging global power demand have combined to make the scramble for gas fiercer by the day. Gas storage facilities in the European Union are only 65% full, a record low, and if Europe turns to aggressive spot purchases ahead of winter, a fight over cargoes with Asian buyers looks unavoidable. Against that backdrop, deals involving gas field development projects worldwide totaled $32 billion in the first half of this year, the highest in more than a decade.
As the race for energy grows fierce enough to command steep premiums on resource development, attention has returned to the pre-emptive investments made in Korea, led by SK Innovation (096770) E&S. The prime example is the Barossa gas field project in Australia. SK Innovation E&S entered the project in 2012 and led the entire development process, from reserve assessment to facility construction.
Gas fields typically take more than a decade to move from exploration to commercial production and require vast capital and risk tolerance, making them difficult territory for private companies. With its 37.5% stake — alongside Australia's Santos with 50% and Japan's JERA with 12.5% — SK Innovation E&S has secured a stable 1.3 million tons of LNG a year.
The real value of the Barossa investment lies in supply stability. Spot purchases become more expensive when market prices spike, but volumes tied to an equity stake follow a fixed cost structure regardless of market conditions. Another strength is that the project sits outside the Middle East, along a secure maritime route. Australia became Korea's largest LNG supplier in the January-July period, accounting for 28.4% of imports, and cargoes from Australia do not have to pass through the Strait of Hormuz, now a conflict zone. "Barossa stands out as a model case for supply chain diversification and resource security, because it is a non-Middle Eastern asset where a private company took part from the development stage and holds long-term volumes," an industry official said.
Korea Gas Corporation (036460), a state-owned enterprise, has also secured a 5% stake in LNG Canada and is bringing in 700,000 tons of LNG a year. Cargoes from Canada's west coast also sail directly across the Pacific, spreading transport risk. Helped by such efforts, the diversification of supply sources has continued: in the January-July period, Korea's LNG imports were led by Australia, followed by Malaysia at 17.8%, the United States at 14.3% and Canada at 8.4%, according to Korea International Trade Association data, while Qatar's share fell to 6.5%.
POSCO International (047050) recently signed a contract to acquire gas fields in the Marcellus basin of the U.S. Appalachian region for $550 million, or about 736 billion won. In LNG terms, that gives the company direct access to roughly 1 million tons a year. Market watchers see the possibility that POSCO International will bring cheaper U.S. gas into Korea in the future.
Hanwha Aerospace (012450) set up Hanwha Horizon USA in the United States last month to handle LNG procurement, trading and logistics optimization. After locking in a supply source through a long-term LNG purchase agreement with U.S.-based Venture Global, the company plans to supply fuel to Hanwha Energy's Yeosu LNG power plant, which is due to begin operating in 2029.
"In a phase where geopolitical conflict and supply chain bottlenecks have become permanent features, simple import contracts alone are not enough to ride out a crisis," an energy industry official said. "A pre-emptive approach that secures both resources and shipping routes, along with an expansion of the value chain, is emerging as a clear alternative."
