Korea Eager to Tap Smart Grid Market

AMEC teams up with Korean public enterprises to jointly explore new and renewable energy, low-carbon business areas, exploration and development of petroleum and gas reserves.

The following are excerpts of an interview between NewsWorld and Han Jin-hyun, director general for energy industries at the Ministry of Knowledge Economy, who touched on policies, including the ones on the emerging smart grid, petroleum and natural gas industries.
Question: Will you tell our readers about prospects for the global smart grid market?
Answer: The smart grid market comprises of the conventional electricity market and the new derivatives market that covers diverse areas, including services for consumers, consolidation and convergence products and electric vehicles. The new derivatives market is forecast to be huge, but its market prospects are not easy at this time. Accumulative investments in the existing market are estimated to total $13.6 trillion during the period between 2007 and 2030, a considerable portion of which is expected to be invested in the new smart grid sector, according to the 2008 World Energy Outlook published by the International Energy Agency.
A survey on the prospects of the global smart grid market and Korea's market share is now under way, and its results will be released in November together with the announcement of a smart grid roadmap.
Q: Will you elaborate on the status and prospects of the establishment of a joint Korean-British energy enterprise?
A: British energy technology company, AMEC signed with Korea Electric Power Corp., Korea Gas Corp. and Korea Development Bank during the Korean-British summit talks this past March.
A global leader in engineering services and project management, AMEC conducts project management services in areas ranging from petroleum and gas exploration and drilling to product production and transportation as well as the dismantling of nuclear power plants, an area in which the company has world-class technology. On the other hand, Korean public enterprises are armed with world-best technology in diverse areas, including the construction, operation and management of nuclear units, but have difficulties in landing international bids due to the lack of overseas market exploration. As a result, the establishment of a joint venture between the companies of the two countries is expected to have synergetic effects in the overseas exploration of the Korean energy industry by combining the Korean public enterprises' excellent technology and AMEC's experiences in the global business sector, its international standing and extensive global network.
Once a detailed contract and legal procedures are completed, a corporate body will be officially established, and afterward, we expect the company to expand into AMEC? Asian headquarters. The joint venture will likely be expanded to include not only such business arenas as the development, construction and operation of nuclear power units and thermal power plants, but also new and renewable energy and low-carbon business areas in addition to the exploration and development of petroleum and gas reserves.
Q: Will you touch on the status and prospects of the Korean petroleum market?
A: Korea's dependence on petroleum imports declined from 54 percent in 1990 to 43 percent in 2008, and the demand and production of petroleum products dwindled in the first quarter of the year simultaneously due to sluggish industrial activities, caused by the global downturn. Petroleum demand dropped by 2.8 percent in the first quarter of the year over the same period of last year. On the other hand, crude oil imports increased 3.1 percent in the first quarter over a year earlier due to the advancing of imports prior to a rise of tariffs to 3 percent in March 2009 from 2 percent in February 2009. The production of petroleum products in Korea declined 0.7 percent in the first quarter from a year earlier, but petroleum product exports surged 20.3 percent due to a rise in light oil products from such countries as China and Japan.
Crude oil prices on the global market have stabilized since the second half of 2008.
Due to a drop in petroleum product demand, caused by the global downturn, crude oil prices plummeted from $140 last July to its current range around $50. Domestic petroleum product prices dropped lower than those on the international market due to a strong dollar against the Korean currency, however. For instance, domestic gasoline prices plummeted from 1,923 won per liter in July 2008 to 1,352 won in January 2009 before rising to 1,552 won this past April.
If the global economy comes out in a worse situation, crude oil prices on the global markets could reverse for a rise.
The participants at the 3rd Asian Ministerial Energy Roundtable Meeting held in Japan this past April expressed the worry that energy price hikes would be feared since a drop in crude oil prices had delayed investments in petroleum development projects.
The government plans to lower petroleum product prices on the distribution stage by spurring competition through such steps as the disclosure of each refinery's prices.
Q: Will you tell us about Korea's natural gas imports and mid- and long-term demand as well as a plan to introduce natural gas from Russia?
A: The nation imports 27 million tons of natural gas yearly, 80 percent or 22 million tons of which is imported on mid- and long-term contracts. In order to stabilize natural gas demand, the Korean government is diversifying natural gas import sources ― the Middle East and Southeast Asia ― to the Northwest Shelf in Australia and the Sakhalin II project in Russia. In particular, Korea takes 1.5 million tons of natural gas from the Sakhalin II project yearly since this past April, a deal signed in 2005 in consideration of such strengths as price competitiveness and shorter transportation distance.
The government announced its ninth long-term natural gas supply and demand plan last December, predicting that the demand for natural gas will increase 1.5 percent to 33.4 million tons in 2022 from 26.52 million tons in 2007. It plans to raise the nation's natural gas storage capacity from 5.16 million kl in 2007 to 15.36 million kl in 2022 in order to reduce the areas where natural gas is not available and to ensure a stable supply and demand management.
Korea and Russia concluded a deal to reduce natural gas import costs and diversify natural gas import sources at their summit talks last September. Korea Gas Corp. and Gazprom of Russia are now conducting a joint business feasibility study. The agreement calls for Korea to import natural gas from 2015 and expand imports to more than 7.5 million tons yearly after 2017.
Q: Will you speak about steps and plans to step up gas and energy safety?
A: The government will focus on raising safety management standards through institutional reform and expanding the energy safety welfare for the underprivileged.
It plans to upgrade safety preparedness by easing restrictions that are feared to have adverse effects on business proprietors and employers'activities and making them advanced and IT-oriented. The MKE is seeking to revamp, on a selective basis, restrictions considered to have little effect on the laxness of safety, yet put too stringent regulations among those whose overhaul is demanded by the Federation of Korean Industries. The restrictions subject to a review include the easing of qualification standards for selecting persons in charge of the safety of freezing storage facilities and the extension of the period for retesting liquefied petroleum gas containers.
The ministry introduced a selective testing system for seven high-pressure products, including high-pressure containers on Jan. 1, 2009, and is considering expanding the system to include vaporizers and refrigerating machines.
In 2010, it plans to revise a relevant law to introduce the Quantitative Management Assessment in 2010 designed to enhance the safety of gas facilities and relax regulations on a rational basis.
The government plans to conduct free checks into gas installations for the underprivileged and low-income households and take faster steps to improve facilities.
A total of 15,200 households belonging to the national basic livelihood system will benefit from a program to improve gas installations free of charge. The beneficiaries of a program for providing free gas valves, dubbed "Timer Cork," to the elderly will rise from 1,000 to 3,000 households.
It plans to conduct free checks into 32,000 gas installations in welfare facilities accommodating children and the aged and repair any poorly-maintained facilities or replace them with new ones free of charge. nw

Han Jin-hyun, director general for energy industries at the Ministry of Knowledge Economy