Subject: Energy Security
Oil has been the dominant energy source in Korea, accounting for roughly 40% of the country’s total primary energy supply (TPES) in 2008. The share of natural gas in the country’s TPES steadily increased from 3% in 1990 to 9% in 2000 and 14 % in 2008. In 2010, the IEA forecasted that the share of oil in the TPES will gradually decrease from 40% in 2008 to 35% in 2020 and 31% in 2035, while the share of natural gas will remain flat.
Korea has very little indigenous oil production, which averaged at 21 kb/d in 2010. Korea’s oil demand increased from 2.14 mb/d in 2000 to 2.25 mb/d in 2010, with an annual average growth rate of 0.5%. Korea is a big consumer of naphtha mainly for the petrochemical industry. Korea’s oil imports in 2010 were 3.14 mb/d, consisting of 2.37 mb/d of crude oil. Korea is highly dependent on the Middle East, which accounted for some 82% of the total crude oil imports in 2010. Korea exported 919 kb/d of oil products in 2010. One-third of the product exports went to the OECD (mainly to US and Japan), while the remainder was destined for non-OECD countries, such as China, Singapore and Indonesia. Korea is a net exporter of oil products.
Diversification of energy fuel sources (energy mix), diversification of import sources of crude oil and LNG, further build-up of SPR (government stocks), expansion of storage capacity for oil and gas, and promotion of domestic and overseas E&P activities have been the main pillars in the energy security policy of Korea. The use of emergency oil stocks is central to Korea’s emergency response policy, which can be complemented by demand restraint measures. During an emergency, the Minister responsible for energy will make the political decision to participate in an IEA collective action and on the emergency response measures, including oil stock release. Korea meets its stockholding obligation to the IEA by holding government stocks and by placing a minimum stockholding obligation on industry. The national oil company KNOC manages the state-owned oil emergency reserves. Korea has been compliant with its 90-day obligation of the IEA since it joined the IEA in March 2002.
Domestic gas production is negligible. Korea produced some 0.5 BCM of natural gas in 2010, which covered merely 1.3 % of the total domestic consumption. Gas demand has steadily increased since the first LNG shipments arrived in 1986. Gas demand reached 42.7 BCM (117 mcm/d) in 2010. The Administration forecasts that gas demand in Korea will increase from 42.7 BCM per year (117 mcm/d) in 2010 to 46.4 BCM (127 mcm/d) in 2024. Natural gas is the third biggest source of fuel for electricity generation. All of the gas imports are in the form of LNG.
Diversification of supply sources, ensuring LNG supply on the basis of long-term contracts, and securing sufficient supply of gas for high seasonal demand are the key elements of Korea’s overall gas security policy. Korea does not have government gas stocks or mandatory industry stocks. An emergency response plan is in place for the event of a gas supply disruption. The Plan foresees the emergency response measures in phases including demand restraint and fuel switching.