New Market Research Report: South Korea Oil & Gas Report Q4 2012

New Energy market report from Business Monitor International: "South Korea Oil & Gas Report Q4 2012"

by Bill Thompson

(WireNews+Co) - Boston, MA - 26 October 2012

While there are new efforts to stimulate upstream oil and gas activity and improve energy self-sufficiency, there is little to suggest that South Korea can develop significant resources, meaning the country is set to remain a key importer of crude and natural gas in liquefied form.

Meanwhile, the government is planning fresh initiatives aimed at reducing oil consumption, while the state gas industry continues to buy into overseas LNG schemes in order to secure supply to meet growing demand.

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The main trends and developments we highlight for the South Korean Oil & Gas sector are:

- South Korea will revive a long-delayed plan to deregulate liquefied natural gas (LNG) imports and domestic sales as part of an overhaul of the country's gas sector, currently dominated by state-controlled gas supplier Kogas, the finance ministry said in July 2012. The bill calls for the phasing out of the country's decades-long monopoly on LNG imports and domestic distribution and the admission of new providers into the market. If passed, the legislation would allow local companies to import LNG and resell it in the domestic market.

- The country is dependent largely on imports of LNG, although South Korea has discussed the risky strategy of piping gas from Russia via North Korea.

BMI is forecasting gas consumption of 59bcm by 2016, rising to an estimated 65bcm by 2021 - almost exclusively in the form of LNG imports. - The economy relied on oil to meet an estimated 42.5% of its energy demand in 2010, and the government is hoping to reduce that share to 35% by 2030.

Finance Minister Bahk Jae-wan has told economic policymakers meeting that comprehensive measures are needed to reduce oil usage because consumption of gasoline rose 5.4% in the first quarter of 2012 despite the spike in crude oil prices, according to South Korea's (Yonhap) News Agency. 'A plan that utilises incentives as well as restrictions should be drawn up to cut back on oil consumption,' the official said. Measures such as mixing additives to fuel, and lowering the tariff quota on gasoline will be explored to reduce consumption.

Bahk said that action will be taken to stimulate competition amongst refineries that supply the market with oil products.

- Our oil demand growth assumptions are cautious, averaging less than 0.5% per annum through to 2016, before stagnating as fuel substitution and energy-saving measures slow consumption growth.

BMI is forecasting oil consumption of 2.26mn barrels per day (b/d) by 2016, compared with an assumed 2.23mn b/d in 2012. South Korean oil imports are set to remain at around 2.21- 2.25mn b/d over the next five years, costing an estimated US$86.4bn in 2012 and falling to US$76.3bn by 2016.

At the time of writing we assume an OPEC basket oil price for 2012 of US$107.05/bbl, falling to US$99.10/bbl in 2013.

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