Transcript Energy Security and Cooperation in Northeast Asia

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
2
Energy & Economic Growth of Korea
GDP
Energy Consumption
15.0%
Energy/GDP Elasticity
2
1.99
1.8
10.0%
8.1%
9.5%
9.3%
9.3%
10.0%
1.6
8.5%
7.5%
7.0%
6.4%
6.1%
5.1%
4.7%
5.0%
1.4
5.2%
3.8%
2.9%
1.24
1.18
4.6%
3.1%
3.1%
2.4%
1.2
1.06
1.1%
1
0.99
0.98
0.0%
80~85
85~90
90~00
97
98
99
00
01
0.75
02
0.75
03
04
0.8
0.74
0.63
0.6
-5.0%
0.52
-6.9%
0.4
-8.1%
-10.0%
0.2
3
Energy Consumption Trend by Source
100%
1.4
18.2
80%
1.8
1.8
1.8
1.7
2
2.3
2.5
20.4
19.7
20.6
21.2
21.6
21.6
21.7
1.3
1.3
1.6
1.9
1.9
2.1
2.4
13.5
14.2
14.1
14.1
14.3
15.1
14.8
1.1
10.7
8.2
60%
8.3
9.3
9.8
10.5
11.1
11.2
12.9
40%
60.4
54.5
53.6
52
50.7
49.1
47.7
45.7
2000
2001
2002
2003
2004
20%
Others
Bituminous Coal
Anthracite Coal
Nuclear
LNG
Petroleum
0%
1997
1998
1999
4
Energy Demand Projection by Sector
60%
50%
2000
2010
40%
2020
56.0
52.9
50.8
30%
20%
24.6
22.6
23.0
20.6
10%
22.0
21.6
1.7
0%
Industry
Transport
Residential & Commercial
2.1
2.1
Public & Others
5
Energy Demand Projection by Source
(Unit: Million TOE)

350
311.8
300
52.0
263.6
250
200
27.2
150
1.2
18.9
Hydro
48.0
32.1

Coal and nuclear are to
grow steadily along
with the electricity
demand growth
Petroleum
50
61.5
Coal
62.6
0
Year
2000
LNG demand is
projected to grow by
5.4% between
2000~2010
139.6
100.3
42.9

LNG
1.4
123.7
100
1.2
39.5
192.9
Nuclear
2010
2020
Oil dependency lessens
(52% in 2000  44.8%
in 2020), but oil will
remain the most
important fuel
6
Energy and GHG Emission
Energy-related CO2 Emission
Year
CO2 Emission
(MTC)
(Sectoral Approach)
Per capita CO2
(TC)
CO2/GDP
(kg CO2 per 1995 US$)
2000
2001
2002
427.66
441.73
451.55
9.1
9.33
9.48
0.69
0.69
0.66
7
Security Aspect of Korea Energy Supply



Energy demand: 220 million TOE
Energy import : US$ 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%
Overseas Dependency
of Energy Supply
(Excluding Nuclear)
Share of Oil in TPES
Share of the Middle
East Oil Supply
Share of Energy
Imports to Total
Import Expenditure
(unit : %)
1980
1990
2000
2001
2002
2003
2004
73.5
87.9
97.2
97.3
97.1
96.9
96.7
71.6
61.1
73.7
83.1
52
83.2
50.6
82.9
49.1
81.8
47.6
81.8
45.7
98.8
73.7
76.9
77
73.3
79.5
78.1
29.5
15.6
23.4
23.9
21.2
21.4
22.1
8
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
9
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
10
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
11
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
12
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
13
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
14
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%)
15
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
16
Overview of Northeast Asia

A Diverse Mixture of Countries with
• Different stages of economic development
• Disparate political and social situations
• Divergence in energy reserves
Comparison of the Northeast Asian Countries(2001)
1999 GDP
Population
per capita
(million)
(US$)
LandArea
(1,000
km2)
Population
Density
(persons
/km2)
Proven Recoverable Reserve
(Mton)
Natural
Coal
Oil
Gas
S. Korea
47.6
8,654
99.5
478
82

6
N. Korea
23.41
355
120.5
192
600
Japan
126.7
23,100
377.8
336
785

7

32
China
1,271.9
784
9,326.4
133
95,900
5,272
1,171
2.6
374
1,556.5
1.4
10,000


146.9
4,000
16,995.8
9
146,560
6,654
47,700
Mongolia
Russia
17
Primary Energy Production/Consumption in NEA (2000)
(Unit:Mtoe)
S. Korea
Japan
China
3-country
total (3a)
N. Korea
Mongolia
Russia
NE Asia
Total (a)
World Total
(b)
3-country
Share (3a /b)
NE Asia
Share (a/b)
Production
Consumption
Production
Consumption
Production
Consumption
Production
Consumption
Production
Consumption
Production
Consumption
Production
Consumption
Production
Consumption
Production
Consumption
Production
Consumption
Production
Consumption
Coal
Oil
Natural
Gas
2.2
42.9
2.1
98.9
498.0
480.1
502.3
621.9
13.8
N/A
3.3
N/A
115.8
110.4
635.2
732.3
2,137.4
2,186.0
23.5%
28.4%
29.7%
33.5%
101.8
0.7
253.5
162.3
226.9
163.0
582.2
N/A
N/A
323.3
123.5
486.3
705.7
3,589.6
3,503.6
4.5%
16.6%
13.5%
20.1%
18.9
2.2
68.6
25.0
22.3
27.2
109.8
N/A
N/A
490.5
339.5
517.7
449.3
2,180.6
2,164.0
1.2%
5.0%
23.7%
20.8%
Nuclear
28.1
28.1
82.5
82.5
4.3
4.3
114.9
114.9
N/A
N/A
33.7
33.7
148.6
148.6
668.6
668.6
17.1%
17.1%
22.2%
22.2%
Hydro
0.5
0.5
7.9
7.9
19.0
19.0
27.4
27.4
0.9*
N/A
N/A
14.2
14.2
42.5
41.6
230.4
230.4
11.8%
11.8%
18.4%
18.1%
Total
30.8
192.3
95.4
511.3
708.6
752.6
834.8
1456.2
14.7
N/A
3.3
N/A
977.5
621.3
1,830.3
2,077.6
8,806.6
8,752.4
9.4%
16.6%
20.8%
23.7%
Self
Sufficiency
16.0 %
18.7%
94.2%
57.3%
88.1%
-
18
Long-term Outlooks of NEA

Total Energy Consumption Forecast (EIA)
(Unit: Quadrillion Btu)
S.Korea
Japan
China
World

1999 2005 2010 2015 2020
7.3
9.2
10.3
11.8
13.2
21.7
22.8
23.5
25.1
26.0
32.0
43.2
55.3
69.1
84.1
381.8 439.3 489.7 547.4 607.1
Average annual percentage
change (1999-2020)
2.8
0.9
4.7
2.2
Carbon Dioxide Emission Forecast (EIA)
(Unit: Million TC)
S. Korea
Japan
China
World
1999 2005 2010 2015 2020
107
128
144
159
175
307
324
330
342
353
669
889 1,131 1,398 1,683
6,091 7,015 7,835 8,773 9,762
Average annual percentage
change(1999-2020)
2.4
0.7
4.5
2.3
19
Energy Cooperation Schemes
 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”
20
Prospective PNG Projects
Yakutsk
Surgut
Krasnoyask
Irkutsk
Tynda
Ulan-Ude
Okka
Chita
Balgovshchensk
Ulanbaartor
Komsomolsk
Khavarovsk
Halbin
Changchun
Urumqi
Vladivostok
Beijing
Shenyang
Wonsan
Tianjin
Xi’an
Pyunyang
SanDong
Nigata
Tokyo
Seoul
Shanghai
21
Power Grid Interconnection Prospect
Amur
Iruktsk
Sakhalin
Russia
Mongol
Shenyang
China
Beijing
N. Korea
Peace Network
E.Siberia-NEA Line
S. Korea
Japan
Tokyo
Hydro Power
Nuclear Power
22
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
23
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
24
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
25
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!
26