Seoul (Platts)--27Dec2007
South Korea is set to crank up the overhaul of its energy sector in 2008
under a new president who has made privatizing state-owned energy companies
and securing massive investments to ensure stable oil supplies his top
priorities.
Lee Myung-Bak, who will take office in February after last week becoming
the first business tycoon to win South Korea's presidency, has pledged to
launch a privatization drive and cut energy taxes. He is also planning an
aggressive campaign to secure energy supplies in the face of rising resource
nationalism across the globe.
Lee plans to speed up the long-anticipated privatization of state-owned
Korea Gas Corporation, South Korea's largest LNG importer and natural gas
distributor. The government's previous efforts to privatize Kogas have been
repeatedly derailed by the company's labor union which claimed that the move
would undermine South Korea's energy security.
Lee is also likely to accelerate efforts to split state-owned Korea
National Oil Corporation into two separate entities covering oil reserves
management and oil field development, and then sell off the development
business to the private sector. The move would be designed to boost the
company's competitiveness and enable it to acquire oil and gas assets more
efficiently.
KNOC, which has interests in 52 overseas projects, is aiming to raise its
petroleum production from 50,000 b/d of oil equivalent currently to 90,000
boe/d by 2011 and 300,000 boe/d by 2016.
South Korea, which has no significant indigenous oil and gas production,
last year sourced just 3.8% of its crude from overseas fields in which
domestic companies held stakes. Lee aims to boost South Korea's
self-sufficiency to 7.6% during his five-year term and has said he would
achieve this by providing additional incentives for private energy developers.
The president-elect has also promised to boost nuclear power generation
and the use of renewable energy sources to reduce consumption of fossil fuels
and meet global environmental commitments. According to a recent roadmap,
South Korea plans to increase its number of large nuclear reactors to 30 from
the current 20 by 2020.
Lee has, meanwhile, pledged to cut oil taxes by 10% to help ease the
burden of high fuel costs on consumers. Taxes, including transport tax,
driving tax and value-added tax, account for around 60% of the retail cost of
gasoline and gasoil in South Korea.
The government had previously dismissed public calls for a cut in oil
tax, citing the recent reduction in South Korea's tax revenues as a result of
a prolonged economic slump.
South Korea is particularly vulnerable to a rise in energy prices as it
relies on imports to meet all of its 2.5 million b/d of crude demand and 22
million mt/year of gas demand. KNOC has said it expected the price of
benchmark Dubai crude, which has risen around 60% over 2007, to average
$78/barrel next year on the back of soaring demand from emerging economies and
limited supply growth.
Separately, Lee has vowed to build a pipeline network, dubbed the "Energy
Silk Road," connecting South Korea with China and central Asia, in a bid to
secure stable oil supplies. "The Energy Silk Road highlights Lee's push for
aggressive energy diplomacy focused on Russia and central Asia," said Kim
Tae-Hyo of Seoul's Sungkyunkwan University, who has served as an advisor to
Lee.
The incoming president has said he would also seek to form an oil
importers' group with the US, China and Japan to coordinate joint steps to
cope with possible crude price fluctuations.
South Korean oil refiners and energy companies have largely welcomed the
rise of the CEO-turned-politician and have planned to increase their overseas
investments. "Refiners are expected to expand their oil development projects
overseas on the back of the incoming government's strong energy drive,"
Daeshin Securities said in a recent policy report.
--Charles Lee, newsdesk@platts.com
|
