London — South Korea's Ministry of Trade, Industry and Energy is urging for cutting the import tariff on LNG to zero next year from 2-3% currently to ease consumers' financial burden and boost consumption of the cleaner fuel, a ministry official said Monday.
The ministry was urging for a similar cut in LPG import tax to zero in 2019 from 2% this year, the official added.
South Korea currently levies a 3% tariff on LNG imported during the peak winter season from October to March, and 2% during the rest of the year. LNG is used for heating and power generation in South Korea.
"The ministry has requested the finance ministry to lower imports tariffs on LNG and LPG to help ease consumers' costs," the official said.
South Korea raised retail natural gas prices for households and industry by an average of 4.2% in July and 3.1% in May to reflect higher LNG import prices linked to crude oil prices.
Domestic natural gas prices are expected to increase further amid rising crude oil futures.
Despite higher prices, LNG sales by Korea Gas Corp., which has a monopoly on domestic natural gas sales, jumped 17.9% year on year to 22.4 million mt during the first eight months this year.
President Moon Jae-in has been pushing for an increase in LNG consumption to reduce coal-based and nuclear power generation.
"The ministry's push for lowering import tariff on LNG is also aimed at boosting consumption of the cleaner fuel as part of the government's policy of energy transition from coal and nuclear to renewables and LNG," the official said.
In line with the energy transition policy, the ministry is urging for a cut in consumption tax on LNG by as much as 74% to Won 23/kg ($0.04/kg) from April next year, while raising taxes on coal for power production by 27.8% to Won 46/kg, he added.
The government raised the tax on thermal coal by 20% to Won 36/kg in April this year which helped boost LNG's competitiveness.
As part of its efforts to tackle air pollution, the government has also pushed for boosting LPG consumption, offering incentives for LPG-powered vehicles. Despite this, South Korea's LPG demand for transportation has been falling due to higher retail prices.
LPG demand for transportation, which accounts for 35% of the country's total consumption, fell 5.7% year on year to 22.98 million barrels over January-August, according to state-owned Korea National Oil Corp.
Retail propane prices averaged Won 1,945/kg in September, up 7.3% from the same month last year, while retail butane prices increased 7.3% year on year to average Won 2,181/kg in September, according to KNOC.
