Current Situation and Prospects of

Energy Cooperation between Two Koreas

Kyung Sool Kim

Korea Energy Economics InstituteCenter for Energy Research, Northeast Asia

Very Limited Interactions So Far

Inter-Korean Energy Cooperation Projects

Sectoral Agenda for Inter-Korean Energy

Cooperation

Difficulties and Polices

Contents of Presentation

Very Limited Interactions So Far

Oil Supply to Kumkang Mountain Tourism Area

~ 2004: 50b/d 2005 ~ : 150b/d Gas Station and Auxiliary Facilities

Asphalt Supply for Road and Airstrip Construction

July 2005: Pitch 8,000ton Jan, 2006: Pitch 8,000ton

Oil Supply for Railroad Interconnection

2002. 10 ~ : 20b/d Storage Tank 3units,

Lubricator 3units

Humanitarian Aids for Ryong-Cheon Accident (2004)

Asphalt 2,000ton Gasoline 167ton Diesel 167ton

Energy Supply to Gaesung Industrial District

Demonstration District

(15 firms) 2004. 5 ~ : 220b/d Storage Tank: Light oil 400kl, LPG 30ton 3 LPG Companies Electricity: 15,000kW by Distribution

Expansion of Electricity Network

100,000kW by Construction of Transmission line(154kV) Under Construction

Energy Supply to Gaesung Industrial District

KOGAS once examined natural gas supply to Gaesung ID

Not fixed yet.

Major Inter-Korean Energy Cooperation Projects

Significant Suggestion

Trilateral Electricity Cooperation

KORUS Proposal

■ Transmit 2 million kW of electricity from Yangju substation in South to Pyungyang substation in North by way of the construction of transmission line

Significant Suggestion

Content & Concept

Cost Estimation

Effects Estimation

Construction of Transmission

Line

Power Generation and Transmission

Total

AC Interconnection

1.5billion US$ 3.9~8.1 billion US$

Generation cost: 50Won/kWh

Load Factor: 76%, Period: 6 ~ 10yrs

5.6 ~ 9.8 billion US$

HVDC1.7 billion US$

Significant Suggestion Cost & Effects

2003 S. Suggestion 2003 + S.S Effects

Capacity 7.77million kW 2 million kW 9.77million kW 1.257

Power Generation

19.6billion kWh17.52billion kWh

37.12billion kWh

1.894

Electricity supply per capita

870.3 kWh 777.9kWh 1,648.2kWh 1.894

Electricity demand/supply condition will be recovered more

than 1990 level N. Korea recorded the highest power generation in 1990 Current electricity supply problem will be totally solved Could be the turning point of national economic recovery

Significant Suggestion Effects

100 million kWh

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450

1970

1975

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Russia, N. Korea, S. Korea

Russian suggestion for the electricity supply from Bureya hydro

power plant to South Korea pass through North Korea: Bureya

Plant – Khabarovsk – Vladivostok – Kraskino – Chongjin – S. Korea

1st Stage : Vladivostok - Chongjin

2nd Stage : Chongjin – S. Korea

Current status: Agreement on electricity network interconnection and electricity supply

between DPRK and Russia (02.4)

4th Three party meeting on Northeast Asia electricity network

interconnection (05.2): Main argument is on the pre-feasibility study in

DPR Korean area

Comprehensive research project by KERI (03~05)

Bureya HPP

Khabarovsk

Vladivostok

CHINA

DPRK

““Russia – DPRK Inter-connections”Russia – DPRK Inter-connections”

AC 500 Kv, 50Hz

«Vladivostok-Kraskino-Chhonjin»

Length ~ 380 km

Transmission ~ 600 MVA

1,500~2,500 million kWh/year

Construction Costs: 160~180mln USD

500 kV Vladivostok

250km

500 kV Kraskino

130km

Chhonjin

300~500MW

Source: ACE Engineering

Details of 1st stage

KORUS Pipeline Proposal

Proposed to import Russian (Sakhalin) natural gas to S. Korea by way of N. Korea Two different lines are suggested

Pipeline from Sakhalin to ROK by way of Khabarovsk , Vladivostok and N. Korea

Suggested as an post-KEDO alternative

Sectoral Agenda for Inter-Korean Energy Cooperation

Non-Physical Capacity BuildingEnergy market systemCoal SectorOil SectorElectricity SectorGas Sector

New & Renewable Energy SectorOther Sector

Energy Cooperation Agenda under Discussion

Cooperation for Non-Physical Capacity Building

Energy experts exchange

Education/Training N. Korean energy experts

Energy statistical system

Energy census and/or Surveys

Cooperation for the introduction of energy market system

Education/Training on commercial energy system

Education/Training on international energy market

Reform energy laws and regulations

Fostering private energy business firm

Energy Cooperation Agenda under Discussion

Cooperation Agenda in Coal Sector Cooperation in coal mine modernization projects Cooperation in the development of new coal mine Coal technology exchange Cooperation in the development of foreign coal mine Cooperation in import of coal from abroad

Cooperation Agenda in Oil Sector

Supply heavy oil to North Korea

Rehabilitation of idle refinery facilities Refine South crude oil in North refinery Cooperation in the construction of oil infrastructure Cooperation in physical distribution of oil Cooperation in the development of N. Korean oil resource

Energy Cooperation Agenda under Discussion

Cooperation agenda in Electricity Sector Electricity supply to Gaesung Industrial District Significant Suggestion to supply 2 mil.kW to DPRK Cooperation for the interconnection of grids Cooperation in Northeast Asian grid interconnection Rehabilitation of power generation facilities in North Modernization of N. Korean transmission and

distribution lines

Cooperation Agenda in Gas Sector

Natural gas Supply to Gaesung Industrial District

Cooperation for the diffusion of LPG in North Korea Cooperation in the construction of gas infrastructure Cooperation in Northeast Asian gas pipeline project

Energy Cooperation Agenda under Discussion

Cooperation agenda in NRSE (New & Renewable Sources of Energy) Sector Cooperation for N. Korean NRSE resources evaluation NRSE technology cooperation Cooperation in the development of demonstration

projects

Cooperation Agenda in Other Sector

Cooperation in energy efficiency improvement projects Energy /environment improvement projects

Difficulties

Policies

Energy Cooperation between Two Koreas

N. Korean Perspective S. Korean Perspective

Policy principle

Self reliance Commercial energy system

Regime Very sensitive to regimeWant to promote regime change

Investment Direct Assistance Private Investment

Approach Take-off at single effort Step by step approach

InteractionMinimize personal interaction

Maximize personal interaction

Different Perspectives on Inter-Korean Energy

Cooperation

Difficulties

N. Korean Restriction S. Korean Restriction

Lack of energy policy capability Unstable energy security

Non-commercial energy systemHarmony of energy and environment

Rigid policy principleInvestment for energy technology development

Poor energy statistical system Modernization of energy industry

Linked energy issues with

external politics

High energy consuming industrial structure

Lack of capital and technology

Different Restrictions of Energy Sector

Difficulties

Principles Policies

Principle of reciprocity Minimize free grant Commercial investment

Public consensus

Priorities in cooperation for people’s living Parliament agreement for government's fund

Principle of integrated energy system

Respect N. Korean system Intend to integrated energy

infrastructure in Korean peninsula

Government's role

Official talks and negotiation Create cooperative environment Tuning laws and regulations Suggest guide and directions

Principles and Policies

Policies

Preparation for the Future Cooperation

Current Status

Research & develop various cooperative projects Government, research institutes, private firms, organizations Wide spectrum of cooperation agenda

Almost all of them are not implacable owing to; Closed characteristics of N. Korean society Delay of system change to market mechanism Undulation of South/North Korean relations Lack of information on N. Korean energy sector

Preparation for the Future

Blue print for inter-Korean energy cooperation Government/private sector Overall/sectoral

Expand contact and communication Enhance energy policy capability Build-up mutual trust and credibility Guide to modern energy system

THANK YOU VERY MUCH

Korea Energy Economics InstituteCERNA (Center for Energy Research, Northeast Asia)