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South Korea to offer tax rebates for bunkering of LNG-fueled ships

The South Korean government has decided to offer tax rebates for LNG-fueled ships starting next year as part of efforts to develop the country into a regional LNG bunkering hub and meet strict marine fuel regulations, energy ministry officials said Aug. 10.

“The government has revised legislation on tariffs so as to provide rebates for imported LNG used for vessels, effectively from Jan. 1 next year,” said an official at the Ministry of Trade, Industry and Energy.

The government currently levies a surcharge on LNG imports at Won 24.20/kg (2 cents/kg), in addition to a 3% tariff on LNG imported during the peak winter season from October to March and 2% during the rest of the year, as well as a consumption tax of Won 30-60/kg.

The import surcharge is part of taxes levied on the main imported energy items, including crude oil, refined oil products and LNG, designed to raise funds for the country’s energy projects.

“The abolition of import surcharge for LNG-fueled vessels is expected to help boost the country’s efforts to develop LNG bunkering and cope with marine fuel regulations,” the official said.

The government is also pushing for cutting the LNG consumption tax to around Won 12/kg to help produce hydrogen and reduce coal consumption for power generation blamed for worsening air pollution, according to the official.

Under its Long-term Natural Gas Supply Plan, the MOTIE forecasts the country’s LNG demand to rise 15.1% through 2034 to reach 47.97 million mt from this year’s estimated consumption of 41.69 million mt, on the back of higher demand for LNG bunkering and hydrogen fuel cell cars and a government-led push to reduce power production from coal and nuclear.

In another effort toward a regional LNG bunkering hub, state-owned Korea Gas Corp. plans to build its fifth LNG terminal, with a projected storage capacity of 800,000 kiloliters, in Dangjin on the country’s west coast.

Under the first phase plan of the Dangjin terminal, Kogas will build four storage tanks, each 270,000 kiloliters, by 2025, as well as facilities for regasification and LNG bunkering, such as loading and reloading for LNG trading.

“Kogas is set to kick off construction of the Dangjin terminal,” the MOTIE official said.

Kogas plans to sell 1.36 million mt of LNG to ships by 2030 through the bunkering joint venture, according to the official.

Source: Platts

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