His words could be dismissed as the superficial courtesies of a senior executive. But the reality is that the Middle East has been good to Kogas and Kogas has been good to the Middle East. Currently the region provides more than 50 per cent of Korea's natural gas and is a major source of spot cargo. 'Our dependence on Middle East gas will not stay the same,' Oh says. 'It will increase. And I don't see any problem with this situation because the supplies from Qatar and Oman have come without any delays or problems.'

LNG is critical to the Korean economy. More than 30 per cent of Korean households - about 10 million in all - rely on natural gas for heat and power. In 2003, more than half that natural gas, about 10.6 million tonnes, came from Qatar and Oman (see table). Domestic demand is expected to grow by about 4.3 per cent a year until 2015 - enough to require Kogas to look for new sources.

'There are two principal reasons why we need additional LNG supply,' says Oh. 'The first is to meet the steady growth in demand. The second is because our first long-term contract - with the Arun III project in Indonesia, which supplies about 2.3 million tonnes a year [t/y] - will terminate in 2007. So we have a need for a new long-term supply of about 3 million t/y.'

Kogas cannot launch an official competition for new long-term supply contracts until it has received government approval. Nevertheless, its market research has begun.

'If Kogas gets permission for negotiations then we can officially start negotiating new long-term supply deals. And I expect a decision in June or July,' the executive says. 'But we have already started contacting possible suppliers and are collecting data. We are talking to potential suppliers in the Middle East - not just our existing suppliers in Oman and Qatar, but others in the region that can offer favourable, flexible supplies.'

Oh says it is impossible at present to say what sort of deal Kogas will be looking for, or even how many contracts it will sign. 'It will depend on the market situation,' he says.

What is clear is that Kogas, one of the biggest single importers in the world of LNG, is looking for greater flexibility in any new agreements. 'The current long-term contracts are too long and have reached their limitations. We want greater flexibility in the future, not only in our equity involvement but in other areas such as engineering and upstream,' says the president. 'Now is a good time for buyers to enjoy more flexible and favourable conditions, with long-term contracts in terms of our participation in equity or upstream. Our equity involvement in gas field development depends on the market situation and will be considered on a negotiated basis.

'At the moment the world LNG market is good for buyers. There is a good balance between the price of oil and the depreciating value of the dollar, which means there is no big change in domestic prices. However if the dollar starts to increase and the oil price hike continues, then we will have a problem.

New supply contracts is not the only aspect of Kogas' business subject to the politicians' will. In 1999, Seoul announced a restructuring plan that called for the privatisation of much of the company's operations and the opening up of the Korean gas market. That was supposed to be completed by 2002. However, a change of government in that year led to a reappraisal of the privatisation, which is still ongoing.

'The government has changed and so has the policy,' says Oh. 'The new government has a more realistic approach.'

In line with that new approach, Kogas will be divided into sectors. There is to be no privatisation of the company's facility sector, which includes the operation of receiving terminals, gasification facilities and pipelines. Instead, the sell-off will be confined to its import and wholesale operations.

'There are currently two alternative proposals under consideration,' says Oh. 'The first is for Kogas' wholesale and import divisions to be split into three entities, which was the original plan. The second is to allow new entries into the market. The government is reviewing these options and will decide which way is most appropriate through consultation with interested parties, including Kogas.'

He pauses briefly before adding a final note of reassurance: 'The restructuring will not affect relations with the Middle East.'

Richard Thompson