IEA praises South Korea's reform of energy market
Date: 06-Jun-02
Country: SOUTH KOREA
Author: Park Sung-woo
South Korea is privatising its power and gas sectors beginning this year under a broader public-sector reform scheme, a key policy aim for the President Kim Dae-jung in the run up to a presidential election in December.
"The government deserves credit for the ambitious reform policies it has formulated and implemented in the electricity sector, and now in the gas sector," IEA said in a statement.
"The most important are that the government set and adhere to a firm timetable for market liberalisation, and that it establish a regulator fully independent from the government," it said.
The IEA review of the country's energy policies came during a five-day visits to Seoul by IEA executive director Robert Priddle. South Korea, the world's fourth-largest importer of crude and oil products, became the 26th IEA member in March.
In April 2001, Seoul spun off the power generation division of state-run power monopoly Korea Electric Power Corp (KEPCO) into six units, of which five thermal power units are being sold off from this year.
The sixth unit, covering both nuclear and hydro power generation, will remain under state control.
Priddle told reporters that the government should give a clear indication of how the nuclear unit will affect competition as plans for the state-owned sector would affect investment plans in the private sector.
Nuclear power supplies about 40 percent of South Korea's total power demand while coal-fired and gas-fired power the remainder.
In contrast, the break-up of the import and wholesale division of state-run Korea Gas Corp (KOGAS) into three entities, and the sale of two of them by the end of this year have not moved ahead as the plans require parliamentary approval.
"KOGAS should be privatised without delay, and without prejudice to existing KOGAS shareholders," the IEA said.
"Uncertainty about future plans could negatively affect investment."
CALL FOR ENERGY EFFICIENCY
The IEA review commended steps taken to diversify supply and other reforms, but called for more attention to energy efficiency in a country which consumes 20 percent more energy per inhabitant than the average of European OECD countries and almost double the energy per unit of GDP.
"The energy intensity of the Korean economy needs to be reduced substantially. Energy efficiency must be given higher priority," the statement said.
Priddle said that establishing prices that fully reflected costs would go a long way towards improving efficiency, in particular, for electricity sold to industry.
He said South Korea's policy on energy security - referring to diversification of energy sources, namely increasing use of natural gas, and sufficient oil reserves - met IEA standards.
"Oil stocks are at a comfortable level, above IEA standard and oil stocks are in high quality," Priddle said.
South Korean oil reserves held by both the government and the private sector are equivalent to 96 days of consumption, above an IEA-set 90-day consumption.
South Korea imports all of its crude and natural gas requirements.
