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Energy Cooperation and Energy Security: Korean Perspective. Professor Ki-Ryun Choi, Ajou University, Korea prepared for 4 th MONDER Colloquium: Martigny, January 9, 2006. Contents. Energy Situations of Korea Energy Security: A New Angle Energy Security Measures of Korea
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Energy Cooperation and Energy Security: Korean Perspective Professor Ki-Ryun Choi, Ajou University, Korea prepared for 4th MONDER Colloquium: Martigny, January 9, 2006
Contents • Energy Situations of Korea • Energy Security: A New Angle • Energy Security Measures of Korea • Significance of NEA Energy Cooperation • NEA Energy Situations and Cooperation • North-South Korea Energy Cooperation
Energy Demand Projection by Sector 2000 2010 2020 60% 50% 40% 56.0 52.9 50.8 30% 20% 24.6 22.6 23.0 22.0 20.6 21.6 10% 2.1 2.1 1.7 0% Industry Transport Residential & Commercial Public & Others
Energy Demand Projection by Source (Unit: Million TOE) • Oil dependency lessens (52% in 2000 44.8% in 2020), but oil will remain the most important fuel 311.8 263.6 192.9 • LNG demand is projected to grow by 5.4% between 2000~2010 • Coal and nuclear are to grow steadily along with the electricity demand growth
Energy and GHG Emission Energy-related CO2 Emission
SecurityAspect of Korea Energy Supply • Energy demand: 220 million TOE • Energy import : US$ 49.6 billion • Korea ranks in the world • No. 10 in energy demand • No. 4 in oil imports • No. 2 in coal and LNG imports • High Import Dependency • 1990 : 87.9% → 2004: 96.7% (unit : %)
Energy Security • Traditional Focus - Quantity Risk • Political or Strategic Energy Supply Disruption • Price Risk + Quantity Risk • Short-term Supply Shortage Price Shocks • Environmental Risk + Price Risk + Quantity Risk • Economic Vulnerability to Environmental Sanctions “Energy Security” - Stable, Cost-Effective and Sustainable Supply of Energy • Set up an efficient and environment-friendly energy supply system + emergency preparedness + International cooperation
Energy Security: A New Angle • 3 Dimensions of Energy Security • Energy Supply Security • Traditional Concern of Securing Stable Energy Supply: import source and fuel diversification, contract flexibility, reliable delivery routes & system, domestic infrastructure integrity, storage, participation in resource development, ... • Energy Economic Security • Broader Perspective of Fortifying Economic Security from Energy Instability: reduce vulnerability to price volatility, enhance energy efficiency, market liberalization, minimize impacts from environmental issues, ... • Energy for Security • Geopolitical Aspect of Energy: energy as a catalyst for international economic cooperation, easing international tensions
Energy Security Measures of Korea • Solidify the Basis of Energy Supply Stability • Oil Stockpiling • Government stockpiling started in 1980 & private sector in 1992 • Enhance Natural Gas Supply Stability • Long-term import contracts & expand supply infrastructure • Enhance Electricity Supply Stability • Construct power generation facility & prepare measures for electricity supply stability following the electric power industry restructuring • Minimize Exposure to External Shocks • Fuel and import source diversification • Encourage Energy Resource Development • Develop East Sea gas field and encourage participation in foreign resource development
Energy Security Measures of Korea • Streamline Energy Economic Foundation - “Efficientization” of the Energy Sector • Establish Environment-friendly Energy Structure • Promote Energy Efficiency and Savings • Spread New and Renewable Energy • Expand Environment-friendly Energy Supply & Technology • Liberalization of Energy Industries • Deregulation of Domestic Oil Price, Elimination of Entry Barriers to Oil Industry & Rationalization of Coal Industry • Electric Power Industry Restructuring in Progress • Gas Industry Restructuring being Pursued • Eliminate Distortions in Energy Prices • Energy Price Reform being Implemented
Energy Security Measures of Korea • Geopolitical Potentials of Energy • Seed for Broader International Economic Cooperation • Northeast Asian Regional Energy Cooperation: easier to implement because of coinciding practical interests • Reduce Political Tensions and Promote Harmony • Inter-Korean Dialogue of Energy and Economic Cooperation • Development of European Coal and Steel Community after WWII to today’s European Union • Consolidated Approach to International Energy Trade • East-West Asia Dialogue: Recognition of Economic Interdependency • Strengthen Bargaining Power through Unified Voices
NEA( North-East Asian Region)Energy Cooperation: It’s Implication • Korean Perspectives • Strengthen Energy Supply Security • Import source & fuel diversification • From isolated to continent-integrated energy system • Address Energy-Environment Issue • Wider access to environment-friendly energy • Alleviate siting problems • Cost-Effective Energy Supply • Transport cost reduction due to adjacency • Avoided costs on infrastructure investment • Catalyst for North-South Korea Cooperation
NEA Energy Security Threatening Factors • Rapid Growth of Energy Demand • EIA forecast of annual growth rate for 1999~2020: China 4.7%, South Korea 2.8%, World Average 2.2% • Growing Dependency on Oil • Oil becoming the leading primary energy in NE Asia • Japan (2nd largest consumer), China (3rd), South Korea (6th) • Increasing Import from Outside the Region • 76% of NE Asia oil imports from the Middle East in 1999: Japan (86%), S.Korea (72%), China (46% 79% in 2020) • Vulnerability to Environmental Issues • High dependency on coal (64% in China) and oil (S. Korea 51%, Japan 50%, China 30%)
Why NEA Energy Cooperation? • Economic Benefits • Resource development • Improvement in facility use • Spillover Effects: market liberalization, etc. • Environmental Benefits • Utilization of abundant environment-friendly energy • Emergency Preparedness • Less vulnerable to factors outside the region • Enable emergency swap of energy supply
Overview of Northeast Asia • A Diverse Mixture of Countries with • Different stages of economic development • Disparate political and social situations • Divergence in energy reserves
Long-term Outlooks of NEA • Total Energy Consumption Forecast (EIA) • Carbon Dioxide Emission Forecast (EIA)
Natural Gas Development & Trans-NEA Pipeline Construction: Irkutsk, Sakhalin, Yakustk... Electricity Power Grid Interconnection & Power Swap Oil Joint Utilization of Storage Facility, Joint Transportation, & Joint Efforts to Correct the “Asian Premium” Energy Cooperation Schemes
Power Grid Interconnection Prospect Amur Iruktsk Sakhalin Russia Mongol Shenyang China N. Korea Beijing Peace Network Japan S. Korea E.Siberia-NEA Line Tokyo Hydro Power Nuclear Power
Obstacles to NEA Energy Cooperation • Political and Institutional Obstacles • Relations among the countries within NEA & Inter-Korean tension • Uncertainty in investment and market conditions, esp. in transitional economies • Economic Obstacles • Financing of huge investment costs • Competition with other energy projects outside of NEA • Geographical/Technological Obstacles • Technological difficulties in the tundra area
Implementation Requisites • Dialogue for NEA Cooperation • Address political & institutional concerns • Investment protection treaties, Assurance of fiscal stability (tax, tariff), Dispute settlement mechanism for resolving trans-boundary jurisdiction, Harmonization of technical standards, etc. • Governmental, commercial & research Sector interchange • Senior Officials Meeting, Expert Forum, Business Forum • An Institutional Vehicle for Infrastructure Financing • NEA Development Fund (Bank) • Finance infrastructure investment/economic development in NEA • Mobilize international capital market for NEA infrastructure needs • Reduce investment risks with governments as its shareholders
North-South Korea Energy Cooperation • Stable North Korean Economy Solidifies NEA Security • Resolving energy shortage is a prerequisite for economic boost • Mutually Beneficial Energy Cooperation • Utilize comparative advantages • South(capital, technology) vs. North(labor, land) • Implications of North-South Korea Energy Cooperation • Open up crossing gate of energy trade and system interconnection • Induce foreign investment and stable political circumstances • Foster a market-oriented institutional transition in N. Korea
Energy... could be either the source of conflict, or a cooperative catalyst for strong regional ties and peaceful coexistent prosperity! Thank You Very Much! Gam-Sa-Ham-Ni-Da!