South Korea Risks $8.7 Billion LNG Overinvestment Amid Declining Gas Demand

A new IEEFA report finds South Korea is investing ₩11.3 trillion in LNG import and storage infrastructure at high risk of overinvestment, as eleven new terminal projects proceed despite the country already having some of the world's lowest regasification utilisation rates. Projected LNG demand under South Korea's net-zero targets is expected to fall 17% by 2036, widening the mismatch between infrastructure capacity and long-term needs.

South Korea currently has seven LNG import terminals with combined regasification capacity of approximately 153 MTPA and 6.3 million tonnes of LNG storage capacity. Five private-sector companies and six state-owned entities are either constructing or proposing new terminals, totalling roughly 37 MTPA of additional regasification capacity — which would raise national capacity to 190 MTPA. IEEFA estimates unused LNG regasification capacity could climb from 107.9 MTPA in 2023 to 152.8 MTPA in 2036, compressing the already low utilisation rate from 29.5% to 19.8%.

The report, authored by IEEFA Energy Finance Specialist Michelle Chaewon Kim, identifies three drivers behind the overbuild: energy security concerns following Russia's Ukraine invasion, growing domestic gas market competition and the emergence of new LNG applications including blue hydrogen and hydrogen blending. However, South Korea's LNG regasification utilisation rate of 33% in 2022 already ranked among the world's lowest against a global average of 41% and Asia's 52.4%. Many planned terminals are located in close geographic proximity, particularly in Dangjin and neighbouring Boryeong in South Chungcheong province, creating competition for a limited pool of end-users.

IEEFA warns that state-owned firms' excessive investment will ultimately burden taxpayers, while private-sector overinvestment may increase financial system stress through additional debt. Kim recommends that South Korea align its LNG infrastructure build with Nationally Determined Contribution targets, improve public-private coordination and avoid promoting technologies that prolong LNG use without contributing to national climate goals. The proposed storage capacity of around 93 days of annual LNG demand in 2036 far exceeds the government's mandated target of nine days of peak winter demand, highlighting the extent of overcapacity risk.

Key figure — ₩11.3 trillion (US$8.7 billion) — estimated cost of South Korea's new LNG receiving terminal projects