Energy Production
Korea is a resources poor country. Korea's indigenous energy resources include
small deposits of anthracite coal, uranium and hydropower. Domestic energy production
in 2001 totaled 5,212 thousand tons of oil equivalent (TOE), accounting for
only 2.7 % of Korea's total primary energy supply.
Production of domestic anthracite coal has declined in recent years as a result
of rationalizing the industry, from 2,228 thousand TOE in 1995 to 1,718 thousand
TOE in 2001. Hydropower generation and renewable energy productions in 2001
were 1,038 thousand TOE and 2,456 thousand TOE, respectively. The uranium deposits
in Korea have not yet been exploited.
Energy Supply
Along with the rapid growth in energy demand over the last several decades,
total primary energy supply in Korea has rapidly increased from 43.9 million
TOE in 1980 to 198.4 million TOE in 2001. However, given the scarcity of indigenous
energy resources, the rise in the demand for energy has primarily been met by
increased energy imports. Accordingly, Korea's dependence on energy imports
has significantly increased and reached 97.3 % in 2001. Apart from a small amount
of domestic anthracite coal, Korea imports all of its primary energy requirement.
Oil retains the highest share of total primary energy supply in Korea, with
51 % in 2001. Korea is the world's sixth largest oil consumer and fourth largest
oil importer. Korea has no domestic oil reserves and therefore imports all its
crude oil. In 2001, Korea imported 1,073 million barrels of oil, three-quarters
of it from the Middle East.
Natural gas was introduced into Korea in the form of liquefied natural gas (LNG)
in 1986. Its entire supply for natural gas is currently met through LNG imports.
LNG supply increased significantly for use in electricity generation and city
gas. Korea is the world's second largest importer of LNG, and the world's seventh
largest importer of natural gas. Gas use grew sharply in the 1990s, increasing
its share in total primary energy supply from 3 % in 1990 to 11 % in 2001.
While supply of domestically produced anthracite coal decreased significantly
due to the rationalization of the industry, imports of bituminous coal have
increased significantly since the early 1980s for the use of power generation
and industrial uses in the steel and cement industries. Korea is the world's
second largest importer after Japan of both steam and coking coals. Although
Korea's import sources of coal are diversified, the bulk of imported coal has
historically come from Australia, and Australian imports have remained stable.
Korea has met the growth in coal demand by dramatically increasing imports from
China, which replaced imports from Indonesia and South Africa in recent years.
Total supply of both domestic anthracite coal and imported coal increased from
13 million TOE in 1980 to 46 million TOE in 2001.
Since Korea's first reactor was commissioned in 1978, the nuclear power industry
has expanded rapidly and Korea is now the fourth most nuclear reliant country
in the world. Korea has 16 nuclear power plants in operation at four sites.
Twelve plants are pressurized-water reactors, and the others are CANDU pressurized
heavy water reactors. In 2001, these plants constituted 27 % of Korea's electricity
generating capacity and generated 39 % of total electricity supply.
Hydropower and renewable energy hold a marginal share in Korea's primary energy
supply, at 0.5 % and 1.2 % in 2001, respectively. The use of renewable energy
is growing quickly however, since their share was only 0.6 % in 1995. More than
93 % of renewable energy is now produced from municipal and industrial waste.
Energy Supply |
|
1980 |
1990 |
2000 |
2001 |
Total Primary Energy Supply (million TOE) |
43.9 |
93.2 |
192.9 |
198.4 |
Energy Import Dependence (%) |
73.5 |
87.9 |
97.2 |
97.3 |
|
Source: Yearbook of Energy Statistics, 2002, Korea Energy Economics
Institute, Ministry of Commerce, Industry, and Energy. |
Energy Supply by Fuel |
(unit: thousand TOE) |
|
1980 |
1990 |
2000 |
2001 |
Oil |
26,830 |
50,175 |
100,279 |
100,385 |
LNG |
- |
3,023 |
18,924 |
20,787 |
Coal |
13,199 |
24,385 |
42,911 |
45,711 |
Hydro |
496 |
1,590 |
1,402 |
1,038 |
Nuclear |
869 |
13,222 |
27,241 |
28,033 |
Others |
2,517 |
797 |
2,130 |
2,456 |
Total Energy Supply |
43,911 |
93,192 |
192,887 |
198,410 |
|
Source: Yearbook of Energy Statistics, 2002, Korea Energy Economics
Institute, Ministry of Commerce, Industry, and Energy. |
Energy Consumption by Sector
Energy consumption increased to 152.9 million TOE in 2001, more than quadrupling
from 37.6 million TOE in 1980. Korea is the 10th largest energy-consuming country
in the world. The biggest increase took place in the 1990s, when energy consumption
grew more rapidly than economic growth.
Industry is the largest consumer of energy, representing 56 % of total energy
consumption in 2001. The transport sector accounted for 21 %, the residential
and commercial sector represented 22 %, and the public services sector accounted
for 2 %.
Energy Consumption by Sector |
(unit: thousand TOE) |
|
1980 |
1990 |
2000 |
2001 |
Industry |
16,571 |
36,150 |
83,912 |
85,158 |
Transport |
4,905 |
14,173 |
30,945 |
31,909 |
Residential/Commercial |
14,034 |
21,971 |
32,370 |
32,893 |
Public/Others |
2,087 |
2,812 |
2,625 |
2,989 |
Total Demand |
37,597 |
75,106 |
149,852 |
152,949 |
|
Source: Yearbook of Energy Statistics, 2002, Korea Energy Economics
Institute, Ministry of Commerce, Industry, and Energy. |
Electric Power
Power Generation
The electricity sector in Korea has grown rapidly to ensure that electricity
is supplied reliably to facilitate the industrial development of the Korean
economy. Electricity generation capacity has increased more than five times
since 1980, from 9 gigawatts (GW) in 1980 to 51 GW in 2001. Gross power generation
also increased significantly from 37 terawatt-hour (TWh) in 1980 to 285 TWh
in 2001, in line with increases in demand for electricity.
The fuel mix in electricity generation changed markedly between 1980 and 2001.
Oil was the major fuel for power generation in Korea prior to 1980, but declined
in importance from 79 % of total electricity generation in 1980 to 10 % in 2001.
LNG and bituminous coal were first used in electricity generation in the early
to mid-1980s, with the first LNG-fired power plant completed in 1986 and the
first bituminous coal-fired power plant completed in 1983. The shares of LNG
and coal in total electricity generation reached 11 % and 39 % in 2001, respectively.
Domestic anthracite coal is used for a small portion of coal-fired generation.
Of all the fuel types available, nuclear power increased most sharply between
1980 and 2001, and it is now the major energy source for electricity generation
in Korea. Hydropower is also used for meeting peak demand, but its share in
total power generation is only 1.5 % in 2001.
Electricity Generation |
|
1980 |
1990 |
2000 |
2001 |
Capacity (MW) |
9,391 |
21,021 |
48,451 |
50,858 |
Peak Load (MW) |
5,457 |
17,252 |
41,007 |
43,125 |
Gross Generation (GWh) |
37,239 |
107,670 |
266,400 |
285,224 |
|
Source: Yearbook of Energy Statistics, 2002, Korea Energy Economics
Institute, Ministry of Commerce, Industry, and Energy. |
Fuel Mix in Electricity Generation |
(unit: %) |
|
1980 |
1990 |
2000 |
2001 |
Oil |
78.7 |
17.6 |
9.8 |
9.8 |
LNG |
- |
8.9 |
10.6 |
10.7 |
Coal |
6.7 |
18.5 |
36.6 |
38.7 |
Nuclear |
9.3 |
49.1 |
40.9 |
39.3 |
Hydro |
5.3 |
5.9 |
2.1 |
1.5 |
|
Source: Yearbook of Energy Statistics, 2002, Korea Energy Economics
Institute, Ministry of Commerce, Industry, and Energy. |
Power Generation Companies |
|
KOSEPCO |
KOMIPO |
KOWEPCO |
KOSPO |
KEWESPO |
KHNP |
Operating Capacity (MW) |
6,100 |
6,138 |
6,346 |
4,910 |
5,800 |
14,252* |
Under Construction (MW) |
1,600 |
1,600 |
1,600 |
2,800 |
1,700 |
4,000 |
Capacity (MW) |
7,700 |
7,738 |
7,946 |
7,710 |
7,500 |
18,252 |
Number of Plants |
7 |
7 |
8 |
8 |
8 |
18* |
|
Source: Ministry of Commerce and Energy.
Notes: These figures include plants to be built by 2006.
* Includes 11 hydropower plants with 536 MW capacity |
Restructuring the Electricity Industry
The electricity industry in Korea has been entirely run by the Korea Electric
Power Corporation (KEPCO), a major state-owned utility power company that owned
94 % of generating capacity and 100 % of transmission and distribution. However,
the Korean electricity sector is now in the early stages of a process of restructuring,
privatizing and liberalizing.
In January 1999, the government adopted the Basic Plan for Restructuring the
Electricity Supply Industry, which proposed to introduce competition gradually
in electricity generation and the retail supply of electricity. The objectives
of the reform are to promote efficiency, security and reliability of supply
and customer choice by introducing competition into the electricity sector.
The plan called for a four-phase reform process. Phase 1 (Current System) runs
through the end of 1999, and Phase 2 (Power Generation Competition) through
2002. Phase 3 (Wholesale Competition Phase) will run through 2004, with Phase
4 (Retail Competition) post 2009.
Several major components of the plan are now being implemented. Two combined
heat and power plants providing district heating in Anyang and Bucheon were
privatized in June 2000. Necessary legislation was passed in December 2000 so
that KEPCO could be restructured and privatized. The Korea Electric Power Exchange
(KPX) was established in April 2001 as a non-profit corporation responsible
for operating both the electricity system and the electricity market.
KEPCO's generation part is comprised of one nuclear-hydro company and five companies
using fossil-fuel or pumped storage generation. The five non-nuclear generation
companies, which are to be privatized beginning in 2002, are: Korea South-West
Power Co. Ltd. (KOSEPCO), Korea Midland Power Co. Ltd. (KOMIPO), Korea Western
Power Co. Ltd. (KOWEPCO), Korea Southern Power Co. Ltd. (KOSPO), and Korea East-West
Power Ltd. (KEWESPO). The number of companies was determined partly by the need
to balance a minimum scale of efficiency as there could be the risk of collusion
if too few companies were created. The companies were to be divided relatively
equally so that each would have a similar mix of generating capacity by fuel
type and location. Both foreign and domestic firms can invest in the power generation
companies.
The nuclear power generation company known as Korea Hydro and Nuclear Power
Co. Ltd. (KHNP) remains public as a separate government-owned company. It owns
and operates the nuclear power plants in Korea and 536 MW of hydropower generation
capacity.
Coal Industry
Domestic Coal Mining
Anthracite coal is Korea's only indigenous fossil fuel. In the early stage of
industrialization, particularly in the 1960s and 1970s, the government took
a series of measures to promote coal production, in order to meet the sharp
increase in energy needs. The government has subsidized the domestic coal mining
industry since 1967 to increase domestic energy supply. As a result, the coal
mining industry has made great progress and by 1987, there were 363 mines producing
24 million tons of anthracite coal.
The coal mining industry, however, began to show a decline from the latter half
of the 1980s because demands for anthracite coal was decreasing rapidly, and
stocks of domestic anthracite coal had accumulated to 10 million tons. Also,
most of the coal mines are located in mountainous areas, and require labor-intensive
underground mining. Production costs are higher than import prices.
Consequently, the Coal Industry Promotion Board (CIPB) was established in 1987
to help uneconomic coal mining operations to close. By 2001, there were only
12 coal mines in the industry, and the production of anthracite coal decreased
to 4 million tons in 2001 from 24 million tons in 1987. Anthracite coal has
been used mainly for space heating in the residential sector, but the use of
anthracite coal for space heating has been largely replaced by oil, gas and
district heating system.
Production / Consumption of Domestic Anthracite Coal |
(unit: million tons) |
|
1980 |
1985 |
1990 |
1995 |
2000 |
2001 |
Production |
18.6 |
22.5 |
17.2 |
5.7 |
4.2 |
3.8 |
Consumption |
19.2 |
23.7 |
19.8 |
5.4 |
4.2 |
4.0 |
Stocks |
3.8 |
5.4 |
6.5 |
7.4 |
9.9 |
9.7 |
|
Source: Yearbook of Energy Statistics, 2002, Korea Energy Economics
Institute, Ministry of Commerce, Industry, and Energy. |
Imported Coal
Korea imports all of its requirement for bituminous coal. Korea commenced importing
coking coal on a large scale from 1973 when Pohang Iron and Steel Company (POSCO)
began operation. Import demand for coal, particularly steaming coal, increased
rapidly from the early 1980s. Steaming coal was imported for power generation
from 1983, and the cement industry fully converted from heavy fuel oil to coal
in the early 1980s.
Demand for coking coal has increased sharply as a result of rapid growth in
the steel industry from 4.4 million tons in 1980 to 17.6 million tons in 2001.
Imports of steaming coal increased from 0.6 million tons in 1980 to 44.0 million
tons in 2001, reflecting both the increased use of steaming coal as a substitute
for oil in electricity generation and rapid growth in cement production. Coal
consumption for power generation increased more than six times between 1990
and 2001 as new coal fired plants rapidly came on line.
Imports and trade of bituminous coal is the least regulated of all domestic
energy market. Consumers are permitted to negotiate their own contracts directly
with producers, and there are no import licenses required.
Imports / Consumption of Bituminous Coal |
(unit: million tons) |
|
1980 |
1985 |
1990 |
1995 |
2000 |
2001 |
Imports |
|
5.0 |
17.1 |
22.8 |
43.2 |
59.6 |
61.9 |
Coking |
4.4 |
8.1 |
11.3 |
17.2 |
19.6 |
17.9 |
Steaming Coal |
0.6 |
9.0 |
11.6 |
26.0 |
40.0 |
44.0 |
Consumption |
|
5.0 |
14.7 |
21.9 |
38.1 |
60.3 |
63.7 |
Iron / Steel |
4.0 |
7.0 |
11.7 |
16.3 |
19.4 |
19.3 |
Power Generation |
- |
5.1 |
5.7 |
14.2 |
33.3 |
36.6 |
Cement Industry |
1.0 |
2.6 |
3.5 |
5.6 |
5.3 |
5.5 |
Others |
- |
- |
0.9 |
2.0 |
2.3 |
2.3 |
|
Source: Yearbook of Energy Statistics, 2002, Korea Energy Economics
Institute, Ministry of Commerce, Industry, and Energy. |
Oil Refining
Industrial Structure
The oil refining industry in Korea was launched in 1964 with an initial capacity
of 35,000 barrels per stream day (BPSD). Along with the increase in petroleum
demand, the Korean refining sector expanded its crude distillation capacity.
The combined crude refinery capacity of Korea's oil refineries stood at 2,438
thousand BPSD as of the end of 2001, about 70 times that of 1964, and the world's
fifth largest refinery capacity as of 2001.
Private companies dominate the Korean oil market. The major oil companies are
SK Corp. (formerly Yukong), LG-Caltex (formerly Honam), S-Oil (formerly Ssangyong
Oil) and Hyundai Oil. SK Corp. is 100 % Korean-owned. Caltex owns a 50 % stake
of LG-Caltex. In 1999, Hyundai sold 50 % of its interest in its refining operation
to International Petroleum Investment Corporation of the United Arab Emirates.
S-Oil is 35 % owned by Saudi Aramco. The relatively young Korean refining industry
operates efficiently and is very competitive internationally.
The Korea National Oil Corporation (KNOC), a state enterprise, engages in exploration,
development and production of oil and natural gas, and builds and maintains
Korea's strategic oil stocks. The Daehan Oil Pipeline Corporation (DOPCO), which
delivers oil products via pipeline to the Seoul metropolitan area, was privatized
in 2000.
Domestic oil refiners are also equipped with secondary facilities, which include
heavy oil cracking facilities (247 thousand BPSD), heavy oil de-sulphurizing
facilities (145 thousand BPSD), naphtha reforming facilities (187.4 thousand
BPSD) and kerosene-diesel de-sulphurizing facilities (658.5 thousand BPSD).
As environmental regulations become more stringent, the maximum sulphur content
permitted in heavy fuel oil decreased from 0.5 % to 0.3 % in July 2001. As demand
for high-sulphur heavy oil is forecast to be stable or to decrease slowly, oil
refineries in Korea are expected to expand their heavy oil cracking and de-sulphurizing
facilities to fit the changing pattern of demand for oil products.
Oil Production Facilities (CDU) in 2001 |
(unit: thousand BPSD) |
SK |
LG-Caltex |
S-Oil |
Hyundai |
In-Chon |
Total |
810 |
600 |
443 |
310 |
275 |
2, 438 |
|
Source: Yearbook of Energy Statistics, 2002, Korea Energy Economics
Institute, Ministry of Commerce, Industry, and Energy. |
Oil Products Supply and Demand
Total production of petroleum products increased from 4.8 million barrels in
1964 to 892.8 million barrels in 2001. Increase in the domestic supply of petroleum
products brought about a drastic change in the pattern of energy consumption.
Since 1990, petroleum consumption had posted an average annual growth rate of
7 % due mainly to the expansion of petrochemical industry and increase in transport
oil demand.
Total consumption of petroleum products in 2001 reached 743.7 million barrels,
or four times greater than in 1980. By major products, gasoline, kerosene, diesel,
and naphtha have all played a leading role in increasing consumption in Korea.
Production of Petroleum Products |
(unit: million bbl) |
1970 |
1975 |
1980 |
1985 |
1990 |
1995 |
2000 |
2001 |
68.3 |
116.1 |
176.2 |
197.6 |
304.5 |
643.4 |
911.8 |
892.8 |
|
Source: Yearbook of Energy Statistics, 2002, Korea Energy Economics
Institute, Ministry of Commerce, Industry, and Energy. |
Petroleum Consumption by Product in 2001 |
(unit: million bbl) |
Gasoline |
Kerosene |
Diesel |
B-C Oil |
Naphtha |
LPG |
Others |
Total |
62.7 |
61.7 |
132.2 |
123.8 |
233.3 |
84.4 |
45.6 |
743.7 |
|
Source: Yearbook of Energy Statistics, 2002, Korea Energy Economics
Institute, Ministry of Commerce, Industry, and Energy. |
Natural Gas Industry
Since Korea introduced natural gas in 1986 in the form of liquefied natural
gas (LNG), demand for LNG increased steadily and significantly from 1.6 million
tons in 1987 to 16.0 million tons in 2001. Korea's entire demand for natural
gas is currently met through imports.
Korea has very limited indigenous gas reserves, and a small offshore project
in the Southeast is underway. The gas field's recoverable reserves are estimated
to range from 170 to 200 billion cubic feet. This is a relatively minor development,
however, and would cover only 2 % of Korea's gas demand, when commercial production
of this field is launched in 2003.
The Korea Gas Corporation (KOGAS), the state-owned monopoly LNG importer, was
created in 1983, being responsible for managing import, storage, transmission
and wholesale distribution of LNG in Korea. Recently, the Korean government
announced a plan to reform the gas industry. The government proposed to introduce
gas-to-gas competition by unbundling imports and sales activities from the operation
of terminals and transmission facilities and instituting an open access regime
for receiving terminals and the transmission network. For the retail market
of gas, there are 20 private city-gas companies supplying city gas to 7.2 million
consumers nationwide.
LNG is mainly used in electricity generation and city gas service. City gas
is made from LNG, and used as a fuel for cooking and heating for residential
and commercial sectors. Demand for LNG in the production of city gas has increased
from 0.6 million tons in 1990 to 10.3 million tons in 2001. Demand for LNG in
power generation increased from 1.7 million tons in 1990 to 5.3 million tons
in 2001.
Demand for compressed natural gas (CNG) used in vehicles is expected to contribute
to the future growth of natural gas consumption. The government has embarked
on a program to have a total of 5000 intra-municipal CNG buses in operation
by the end of 2002 in major Korean cities.
LNG Demands (unit: thousand tons) |
(unit: million bbl) |
|
1987 |
1990 |
1995 |
2000 |
2001 |
City Gas |
- |
575 |
3,413 |
9,528 |
10,300 |
Power Generation |
45 |
1,741 |
3,606 |
4,688 |
5,288 |
Own Use |
8 |
12 |
100 |
340 |
402 |
Total |
53 |
2,328 |
7,118 |
14,557 |
15,989 |
|
Source: Yearbook of Energy Statistics, 2002, Korea Energy Economics
Institute, Ministry of Commerce, Industry, and Energy. |
Alternative Energy Technology
Alternative energy use was 2,457 thousands TOE in 2001 and held a marginal share
in Korea's total primary energy supply, at 1.2 % in 2001. However, the use of
alternative energy is growing quickly, since their supply was 1,162 thousand
TOE in 1995 accounting for 0.6 % in total energy supply in Korea.
Promoting alternative energy use both as a source of energy security and as
cleaner energy is an important energy-policy objective in Korea. The initial
effort dates to 1987 when the Ministry of Commerce, Industry and Energy (MOCIE)
introduced the New and Renewable Energy Development and Promotion Act in an
attempt to further reduce Korea's dependence on imported fossil fuels, especially
petroleum. The Act encouraged installing waste-incineration facilities that
generate heat and power and residential solar heaters for home water heating.
It also promoted small hydropower plants and facilities to use methane gas.
The Act constituted the initial framework for the development of new and renewable
energy technologies in Korea.
Solar thermal hot-water units and industrial waste incineration system have
been commercialized and are being disseminated actively. More than 94 % of alternative
energy is now produced from municipal and industrial waste. At the end of 2001,
442 industrial and municipal waste incinerators were producing locally-consumed
steam in Korea. The incinerators provided clear benefits for energy production,
but the air pollution they cause has gradually become a matter of concern. The
southern coastal area has the greatest economic potential for solar thermal,
which can be used in greenhouses, fish farms, swimming pools and industrial-heat
processes. The government aims to expand the residential use of solar water-heating
systems in rural areas in small- and medium-sized cities. So far, 185,909 units
of residential solar thermal water heaters have been installed, producing 37.2
thousand TOE of energy in 2001.
Basic research on photovoltaic (PV) systems has been completed, and they are
coming into use. The 88 inhabited Korean islands are the main potential sites
for PV off-grid generation. PV power systems are being used for unattended lighthouses,
emergency highway lighting and demonstration PV electrification on isolated
small islands, Hahwado (60 KW), Marado (30 KW) and Hodo (100 KW). Total installed
capacity of PV systems amounted to 4.9 MW in 2001. At US$0.65 to US$1.00 per
KWh, the cost of PV generation is still considered too high to compete with
conventional power generation.
As for wind power generation, the coastal, island, and mountain areas of Korea
have an average wind speed of 4.0 to 5.6 meters per second. By the end of 2001,
40 wind plants had been installed with a total capacity of 6.6MW, generating
electricity at a cost of US$0.10 per KWh. Technological development has improved
reliability, increased the size of turbines and thereby contributed to lower
costs.
The government is now reviewing the possibility of producing methane from landfills.
Fourteen large-scale landfill sites with an overall estimated gas generation
potential of 647 thousand cubic meters present attractive opportunities for
project development.
In February 2001, the government announced an Alternative Energy RD&D; Basic
Plan, as a renewed framework for further development of renewable energy. Wind,
Fuel Cell and PV power are targeted as top-priority technology areas on which
the government will focus its R&D; support. Other areas targeted are solar thermal,
waste and biomass.
The MOCIE has set a target of a 2 % share of new and renewable energy in the
total primary energy supply by 2003, and a target of 3 % by 2006. From 2001
to 2006, the government plans to invest around US$ 800 million to help broaden
the dissemination of renewable energy technology. It envisages the following
measures: 1) Providing financial support and preferential tax treatments as
incentives for the research, development, demonstration and dissemination of
alternative energy technologies; 2) Introducing mandatory use of renewable energy
for newly constructed public buildings; and 3) Establishing a mechanism by which
surplus electricity sold to public grid from renewable energy facilities will
be purchased at rates that provide sufficient incentives to make renewable energy
projects viable.
Alternative Energy Utilization Goal |
(unit: thousand TOE) |
|
1995 |
2001 |
2006 |
Waste |
804.5 |
4,265.0 |
5,050 |
Biomass |
59.2 |
148.0 |
495 |
Solar Thermal |
22.1 |
37.2 |
102 |
Small Hydro Power |
20.4 |
20.9 |
111 |
Photovoltaic |
2.2 |
5.9 |
102 |
Wind |
0.1 |
3.2 |
126 |
Fuel Cell & Other |
- |
- |
7 |
Total |
908.5 |
3,457.6 |
5,913 |
|
Source: Ministry of Commerce, Industry and Energy, 2001. |