Energy Crisis in DPR Korea and Cooperation Issues

1. Energy Crisis in DPR Korea and Cooperation Issues DPRK Energy Expert Study Group Meeting Stanford University, Palo Alto, California, USA June 26 – 27, 2006 Ji-Chul Ryu, Ph.D. Korea Energy Economics Institute

2. Energy Crisis in DPR Korea

3. Energy Crisis in DPR Korea Total Primary Energy Supply (unit: million TOE)

4. Energy Crisis in DPR Korea • Total primary energy supply •  3.5 % pa since 1990 • 16.1 million TOE (Ton of oil equivalent) in 2003 = 66 % of 1990 level(less than 1/13 of total energy supply in Korea) • The downturn of the energy sector in the country is a combined result of • Significant cut of subsidized oil supply from the Former Soviet Union and China since the late 1980's • Failure to maintain and modernize energy infrastructure, • Impacts of natural disasters, and • Inefficient energy production

5. Energy Crisis in DPR Korea • Closed economic system: Self-reliance policy (Juche ideology) • Domestic energy sources: Anthracite coal, hydro • Coal: 72%, Hydro: 16% , NRE: 5%, Oil: 7 % • Linked energy issues with external politics • Oil supply: Political friendship with China and FSU • Electricity: KEDO 2 Light Water Reactor (LWR)  Energy Poverty + Collapse of Industry • Non-existence of commercial energy markets  financing problem • Serious shortage of fuels for people and industry • Deforestations  flooding

6. Fuel wood use in DPR Korea 땔감채취 주민(금강산 온정리)

7. Deforestation and Land Slide Gaesung area

8. Transport Energy in Gaesung, DPR Korea

9. Energy Indicators in Two Koreas 19902003 Unit DPRKKoreaDPRKKorea Total Energy MMTOE 24.093.216.1215.1 per capita TOE 1.2 2.2 0.7 4.5 Generation capacity GW 7.1421.027.7756.05 Generation TWh 27.7 107.7 19.6 347.3 Refinery capacity 천bbl/d 70840702,438 Oil imports MMbbl 18.5 308.4 4.2 804.8 Coal production million ton 33.217.221.93.3 Source: Korea Energy Economics Institute, 2004 National Statistics Administration, 2004, Republic of Korea

10. Energy Policy of DPR Korea Policy ideologySectorPolicy Measures Self-Reliance Production Hydro development Coal development Oil investigation Consumption Maximum use of coal & hydro Limited use of imported energy Extended use of renewable energy Energy conservation Technology Technology development for domestic resources utilization

11. Recommendation for DPR Korea • Abandoning its long-pursued self-reliance economic policy • opening the energy system to commercial energy supply from overseas • Establishing market mechanism for energy and creating energy market • introducing energy pricing and tax systems and reforming energy legal structures • Promoting active regional/international cooperation • rehabilitation of the existing energy facilities • expansion of energy system + accommodating foreign investments. • Adopting cost-effective energy options in recovering energy system • increasing role of petroleum in energy mix in parallel of pursuing new and renewable energy in the short term • natural gas with the medium-long term goals. • Strengthening energy policy making capability • improving energy statistics and modeling infrastructure • training energy experts and scientists.

12. Creation of Environment for Energy Cooperation with DPR Korea • Accept demand from the international community for security concerns transparently • dismantling nuclear weapon programs • de-coupling the energy issues from the politics • Access to the membership of the IFO • International Monetary Fund (IMF), other international financing organizations (WB, ADB), and multilateral energy cooperation bodies • Closely consult with Korea and other developed countries in reconstructing the energy system • energy systems of both Koreas can be integrated into mutually compatible single system in future.

13. Energy Cooperation Agenda with DPR Korea • Providing with training/education programs for energy planning/ implementation • Humanitarian aids for supply of energy products for civilian use • anthracites coal, LPG, kerosene, diesel • heavy fuel oil and coal for power generation • Power supply to a limited area (eg, Gaesung, Pyeongyang) • Renovation/re-construction of existing energy production facilities: • coal mines, refineries, power plants, transmission/distribution systems • technical, financial and experts assistances • Power interconnection with Korea and Russia Far East • Natural gas pipeline project: Sakhalin and Irkutsk projects • Resuming the construction of two LWRs of the KEDO ?

14. Energy Projects in Implementation with DPR Korea • Power Supply to Gaesung from Korea • 15,000 kW to South Korean factories from March 2005 • NGOs’ Briquette Aids to Civilians Kumgang Mt. area • cooking and heating • Training/education program • UN DESA, EU programs • Inter-governmental meeting for regional energy cooperation in Northeast Asia • UN/ESCAP, Korean government initiatives + SOC meetings

15. NGOs’ Briquette Aids to DPR Korea

16. Energy Projects in Discussion with DPR Korea • Proposal of Power Supply of 2 GW by Korean government • to replace the KEDO’s two LWRs • Power Interconnection with Russia • Russia’s supply of power to DPR Korea • Size: 500 MW, Distance: 380 km,Capital: US$ 180 million • Natural gas pipeline projects from Russia • Multilateral cross-border projects with the long term goals

17. Russia-DPR Korea Power Interconnection 500 kV Network Bureya HPP Khabarovsk CHINA (Source: Kap-Goo Yoon, 2004) Vladivostok DPRK

18. 동북아 천연가스 개발 협력 (Source: TNK-BP, 2005)

19. Thank you very much Gamsa’hamnida - End -