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S. Korea to focus on global energy resource development
Sept. 28, 2005
South Korea is required to engage in the aggressive development of overseas energy resources as it faces a uphill task to overcome high oil prices, government and private experts said Wednesday.
Policymakers and experts agree that rising oil prices will require a new policy and mind set.
"Predictions that oil prices will fall have all been proven wrong," said Oh Young-ho, deputy minister for energy and resources policy at the Ministry of Commerce, Industry and Energy. He said the only viable option left is for the country to go overseas.
Oh said South Korea is looking at Spain, Italy and France, countries that do not have significant oil reserves of their own but have become producers of crude oil by managing overseas oil fields, insulating them from oil price shocks.
The official said South Korean companies, led by Korea National Oil Corp. (KNOC), already held oil field development rights in Vietnam and Yemen and were also conducting explorations in Africa.
Dubai crude oil, which accounts for roughly 80 percent of the country's imports, rose from US$34.26 a barrel on Jan. 3 to $55.37 as of Monday. South Korea paid an average $42.43 a barrel for the first five months of the year, 37.4 percent more than the same period in 2004. The country spent $15.2 billion importing oil from January through May compared with $10.7 billion during the same period last year.
South Korea imported an estimated $29.2 billion worth of oil, coal and natural gas in the first half of the year.
"In effect, the amount spent on oil was roughly the same as that earned by companies such as Samsung and Hyundai Motor from sale of semiconductors and cars over the same timeframe," a spokesperson for the Federation of Korean Industries said.
The energy expert said that conservation measures alone are not considered a viable solution because of South Korea's reliance on heavy industries.
Yoo Seung-jick, a senior official at the state-run Center for Energy Research Northeast Asia, said South Korea should exploit a current lull in the exploration and development of global oil reserves.
This view is supported by Joo Bong-hyeon, chief of the energy and resources policy bureau at the Commerce Ministry.
He said developing overseas reserves served various purposes if executed correctly.
Joo said the acquisition of a foreign oil company is being considered to put the KNOC in the same league as Italy's ENI and Spain's Repsol-YPF.
"The national oil company currently has about 290 technicians in oil exploration, compared to over 3,000 at ENI," he said, saying the best way to increase technicians to that level is to buy an existing company.
The acquisition of oil field exploration rights is also under consideration, as are ways to get private investors to assist in the development of energy resources.
"There is an estimated 400 trillion won ($386.4 billion) in spare capital in the market and by attracting that into the energy sector, the government can help to divert resources into areas beneficial for the economy," the official said.
The government said it is looking at the feasibility of boosting the potential of the KNOC.
"South Korean engineers are truly world class, especially in exploration as they showed in the discovery of the 15-1 offshore oil field in Vietnam," an official said. He said South Korea could become influential in the global market by making smart investments and capitalizing on its strengths.
South Korean policymakers said they also have plans in place for the development of gas hydrate deposits and the pursuit of alternative energies such as bio-diesel and hydrogen fuel cells.
They are also considering raising the country's dependence on nuclear energy from the present 40 percent to near the level in France, where around 90 percent of its electricity comes from atomic reactors.
"This is an issue that needs to be discussed, although it must be approached delicately due to the level of controversy it generates," said one academic, who declined to be identified. He said France's decision to pursue nuclear energy allows it to export electricity to neighboring countries.