KEEI
KEEI
Korea Energy Demand Outlook
ISSN 2093-7199
June 2012
Volume 14, No. 2 QUARTERLY ENERGY OUTLOOK
Korea Energy Economic Institute
132 Naesonsunhwan-ro, Uiwang-si, Gyeonggi-do Phone: (031)420-2114
Fax: (031)422-4958
E-mail : webmaster@keei.re.kr Hompage : http://www.keei.re.kr
ISSN 2093-7199
June 2012
Volume 14, No. 2
KEEI
Korea Energy Demand Outlook
·Director of research Kim, Tae-heon(thkim@keei.re.kr)
·TPES/Coal/Transformation Kim, Tae-heon(thkim@keei.re.kr)
·Final Energy/Electricity Choi, Do-young(dychoi@keei.re.kr)
·Oil/Town gas/Thermal energy Lee, Sang-youl(akan539@keei.re.kr)
·Material/Research support Oh, An-na(12218@keei.re.kr)
·Material/Research support Jo, Eun-jeong(12220@keei.re.kr)
·Statistical support Chung, Chang-bong(cbdchung@keei.re.kr) Phone: +82-31-420-2148, +82-31-420-2234
Fax: +82-31-420-2164
KEEIKorea Energy Demand Outlook
The 「KEEI Korea Energy Demand Outlook」analyzes the international energy market and the supply and demand for energy in Korea, and makes short-term forecasts of energy demand.
This report quickly identifies recent changes in energy supply and demand and provides energy supply/demand forecast indexes and other information of great interest for formulation of government policy. It is intended to facilitate government efforts to set and adjust overall policy on energy supply and demand.
This report was written and edited by the Energy Demand and Supply Forecast Team under the Center for Energy Information and Statistics of KEEI.
1. Trends on Energy Consumption……… 4
2. Outlook on Energy Demand ……… 11
3. Major characteristics……… 21
4. Policy implications……… 29
<Table 1> Primary energy consumption trends and outlook ……… 18
<Table 2> Final energy consumption trends and outlook ……… 19
<Table 3> Major indexes related to energy consumption ……… 20
<Table 4> Comparison between the average temperature of the last 20 years and the average temperatures of 2005 and 2010 ……… 22
<Table 5> Energy demand scenarios for 2012 ……… 22
<Table 6> Outlook on energy intensity ……… 27
[Figure 1] Economic growth and primary energy consumption ……… 4
[Figure 2] Changes in primary energy consumption increase rate ……… 6
[Figure 3] Rates of increase in final energy consumption by sector ……… 8
[Figure 4] Change in value added by business type under the manufacturing industry in the first quarter of 2012 ……… 9
[Figure 5] Outlook on economic growth rate and primary energy increase ……… 11
[Figure 6] Outlook on energy intensity and per-capita energy consumption ……… 13
[Figure 7] Share accounted for by each energy source ……… 15
[Figure 8] Share of final energy demand occupied by each sector ……… 17
[Figure 9] Consumption of town gas for industrial use ……… 24
[Figure 10] Oil dependence and forecasts……… 28
Contents Contents
Table of Contents for Titles
Table of Contents for Tables
Table of Contents for Figures
Primary energy consumption for the first quarter was tentatively tallied at 72.6 million toe, a year-on-year rise of only 0.3%.1)
This meager increase is attributable to warm weather as well as the slowdown in the Korean economy, triggered by continued deceleration in global economic growth.
- The Korean economy grew at a rate of 2.8% in the first quarter, and the nation’s index of industrial production rose a mere 2.4% year-on-year.
- Temperatures were higher than during the same period of the previous year, leading to a year-on-year drop of 4.2% in the heating degree day (HDD).
- Temperatures have greater influence on energy consumption when the economy grows more slowly.
Excluding energy for raw material use (non-energy oil, coking coal), primary energy consumption rose a mere 0.1% in the first quarter.
- A 6.1% rise in naphtha consumption resulted in a slight rise in the primary energy consumption increase rate.
- Energy for raw material use accounted for 23% of primary energy consumption.
Notes: Values for 2011 and 2012 are preliminary.
[Figure 1] Economic growth and primary energy consumption
Trends on Energy Consumption
1
1. Trends on Energy Consumption
Energy consumption by source in the first quarter
Despite the slowdown in the economy, major energy sources for industrial use, including electricity and town gas, led a rise in consumption.
Oil consumption rose 1.2% year-on-year, attributable to a rise in international oil prices.
- The average crude oil import price (C&F) was 116.2 dollars per barrel, up 18.9% from the same period of the previous year.
- Consumption of non-energy oil (4.9%), including naphtha, and LPG (9.1%) led the rise in consumption. In contrast, consumption for fuel dropped substantially (5.3%).
- Naphtha consumption for industrial raw material use went up 6.1% owing to influence from petrochemical industry production. When excluding naphtha, petroleum product consumption indicated a drop of 2.5% year-on-year.
- Consumption of petroleum products for transport rose slightly (2.0%), but consumption of fuel oil for industrial use and for power generation fell as a result of a sharp rise in heavy oil prices.
- Oil consumption for heating in the residential/commercial/public sector dropped 10.7%
owing to warm weather and fuel replacement.
- The percentage of total oil consumption accounted for by naphtha rose to 45% in the first quarter.
1) The new energy conversion factor (changed on December 30, 2011) was applied to the energy supply/demand balance starting in 2012. When the previous energy conversion factor is applied, primary energy consumption indicated a year-on-year increase of 1.5% in the first quarter of 2012.
Consumption of coal went up only 2.3% because of the economic slowdown.
- Consumption for industrial use and residential/commercial use fell. Notwithstanding, consumption for power generation went up 4.4% as a result of high capacity utilization of bituminous coal-fired power generation facilities.
- The rate of increase in bituminous coal consumption for steel making, which accounts for 20% of total coal consumption, has been substantially declining since the third quarter of 2010. There was only a 1.1% increase in the first quarter.
Natural gas (LNG) consumption gradually rose for both power generation and gas production, resulting in an overall increase of 3.1%.
- This is because demand for town gas and electricity was not high due to the warm temperatures compared to the previous year and the economic downturn.
- Consumption of town gas rose only 2.3% as a result of decreased consumption for residential/commercial use despite a continued rise (10.1%) in consumption for industrial use.
- The main cause of the rapid increase in gas consumption for industrial use is deemed to be rapid replacement of oil with town gas in sectors that use gas for petrochemical raw material use in response to the persistently high oil prices.
[Figure 2] Changes in primary energy consumption increase rate
1. Trends on Energy Consumption
Nuclear power was little changed from the previous year, rising only 0.6%.
The upward trend in electricity consumption definitely slowed in the first quarter of 2012.
- In the first quarter of 2012, electricity consumption for industrial use went up only 4.6% year-on-year as a result of a slower rise in industrial production.
- The slower rise in electricity consumption for industrial use was still in excess of the economic growth rate (2.8%) for the same period as well as the rise in industrial production (4.2%).
- Electricity consumption for residential and commercial use rose only 2.1% and 0.5%, respectively, year-on-year as a result of the relatively warm weather and government measures to stabilize electricity supply and demand.
The percentage of primary energy consumption by source was highest for oil (37%), followed by coal (27%), LNG (23%), and nuclear power (11%).
Consumption trends by sector in the first quarter
Energy consumption in the industrial sector has been leading the rise in overall energy consumption since the mid-2000s. However, the rate of increase in energy consumption in the industrial sector has substantially fallen. Tentative figures indicate that final energy consumption in the first quarter of 2012 fell 0.4% year-on-year according to the new energy conversion factor.2)
Consumption in the industrial sector rose only 0.3% as a result of poor industrial activity triggered by the economic slowdown.
* The index of mining and manufacturing production rose 4.2% in the first quarter of 2012.
- This is attributable to poor exports and domestic demand, a result of the prolonged European financial crisis, global economic slowdown, and a slowdown in growth in China and India.
2) When the same calorific values as of the same period of last year are applied, final energy consumption went up 1.7%. The rates of change in consumption in the industrial, transport, and residential/commercial/public sectors are 2.5%, 1.9%, and -2.1%, respectively.
- In the first quarter, there was slower rise in energy consumption in the industrial sector.
This was mainly a result of a reduction in the assigned calorific values of major energy sources for industrial use, including naphtha (a 2.5% increase if the previous energy conversion factor is applied).
- Consumption of the manufacturing industry, which accounts for the bulk of energy consumption in the industrial sector, rose 1.2% as a result of relatively strong performances by the fabricated metal and petrochemical industries. Energy consumption by the fabricated metal industry and petrochemical industry rose 8.1%
and 2.0%, respectively.3)
- Value added by the manufacturing sector rose 4.1% year-on-year. This was substantially above the economic growth rate (2.8%). Notwithstanding, energy consumption increased relatively slowly.
[Figure 3] Rates of increase in final energy consumption by sector
3) If the previous energy conversion factor is applied, consumption in the manufacturing industry increased 3.3%
year-on-year in the first quarter. Consumption went up 8.4% and 5.7%, respectively, in the fabricated metal and petrochemical industry.
- Value added by the fabricated metal industry rose 4.6% and that by the petrochemical industry rose 2.6%.
Source: Statistics Korea, Korean Statistical Information Service (http://kosis.kr)
Energy demand in the transport sector has been stabilizing since 2000. Energy consumption in the transport sector4) rose 1.1% despite the persistently high oil prices due to an increase in the number of registered automobiles.
* The number of registered vehicles rose 1.7% in the first quarter of 2012.
- The number of registered vehicles in the first quarter of 2012 rose 1.7% year-on-year.5) However, energy consumption for transport remained steady, a result of the rise in oil prices and the general economic downturn.
- The average price of Dubai oil in the first quarter of 2012 was 116.1 dollars per barrel.
1. Trends on Energy Consumption
4) Energy consumption in the transport sector recorded high growth of an annual average of 7.9% in the 1990s.
The rate of increase fell to an annual average of 1.7% after 2000.
5) Rate of increase in registered vehicles by fuel type: Gasoline: 3.6%; Diesel: 2.2%; LPG: -0.4%; CNG: 8.5%;
Hybrid: 82.4%
[Figure 4] Change in value added by business type under the manufacturing industry in the first quarter of 2012
This marked an increase of more than 10 dollars over the average price ($106.0/bbl) recorded the previous year.
- Prices of major petroleum products for transport, including gasoline, continued an upward trend even into this year.
Consumption in the residential/commercial/public sector fell 2.6% year-on-year, attributable to warmer weather compared to the same period of the previous year and the implementation of policies aimed at managing electricity demand in the winter.
* In the first quarter of 2012, HDD fell 4.2% year-on-year.
- Despite a 2.5% rise in the service industry production index in the first quarter, energy consumption fell due to the unusually warm weather and other factors.
- The lower consumption in the sector is attributable to several factors: A technical decline after the steep increase in consumption (5.1%) in the same period of the previous year; lower consumption in response to the sharp rise in international oil prices; and effective government policy on managing energy demand.
- With the implementation of electricity demand management policies in December 2011, restrictions on heating temperatures were imposed on general buildings (47,000 buildings). The service industry faces restrictions on the use of neon signs. Public organizations are required to reduce electricity consumption by 10%.
Primary energy demand in 2012 is expected to rise 0.6%6)year-on-year to 273.0 million toe.
Forecasts on stabilization of primary energy demand in 2012 are the result of expectations of lower economic growth in Korea and abroad and international oil prices remaining at high levels.
* Economic growth rate (%): (Year 2010) 6.3 →(Year 2011) 3.6 →(Year 2012) 3.3
Nuclear power and LNG consumption are forecast to indicate relatively high growth as a result of strong electricity demand and the commencement of operation of new nuclear power plants.
- Nuclear power generation is expected to rise slightly with the commencement of
2. Outlook on Energy Demand
Outlook on Energy Demand
2
[Figure 5] Outlook on economic growth rate and primary energy increase
6) The new energy conversion factor (changed on December 30, 2011) was applied to the energy supply/demand balance starting in 2012. When the previous energy conversion factor is applied, primary energy consumption is forecast to rise 2.1% year-on-year in 2012.
operation of new nuclear power plants (Singori Nuclear Power Plant Unit 2, Sinwolseong Nuclear Power Plant Unit 1) despite the stoppage of operation of Gori Unit 1 in the first half of the year.
* Rate of increase in nuclear power generation: (Year 2010) 0.6% →(Year 2011) 1.1%
→(Year 2012) 4.0%
* Rate of increase in LNG demand: (Year 2010) 26.8% →(Year 2011) 8.3% →(Year 2012) 4.2%
Energy demand for raw material use (non-energy, coking coal) will likely fall by 0.6%
(rise by 2.1% based on the previous energy conversion factor), reflecting the economic slowdown.
- Energy for raw material use is expected to account for 25% of primary energy demand in 2012.
Forecasts on key energy indicators
Energy intensity is expected to improve 2.6% from 0.251 toe/million won in 2011 to 0.244 toe/million in 2012. There are substantial energy intensity improvement effects with the change in the energy conversion factor.7)
- Energy intensity deteriorated in 2009 and 20108), but began to rebound in 2011 and is forecast to continue improving.
Per-capita energy consumption is forecast to rise from 5.45 toe in 2011 to 5.46 toe in 2012.
7) When the previous energy conversion factor is applied, energy intensity is expected to improve 1.2% in 2012 to stand at 0.248.
8) It deteriorated in 2009 because of an increase in energy transformation loss, triggered by a sharp rise in electricity consumption, and the commencement of operation of new facilities in energy-intensive industries. It worsened in 2010 mainly because of a sharp rise in energy consumption for industrial use and an increase in energy consumption for cooling and heating purposes, a result of unusual weather in the summer and winter.
2. Outlook on Energy Demand
Forecasts for energy demand by source
Coal demand is expected to rise 0.5% in 2012.
- Bituminous coal demand is forecast to rise 0.9% year-on-year. Demand for power generation is expected to slightly increase (0.9%) as a result of a rise in the utilization rate, triggered by the complete absence of facility expansion. Coking coal demand is forecast to rise only 1.6% as a result of the economic slowdown.
- Anthracite demand is expected to record a year-on-year decrease of 4.5% owing to the continued decline in demand for power generation and the peaking of demand for industrial use, which had been rising but is now going down (-4.4%).
Oil demand is forecast to continue gradual growth in 2012 as well, indicating a year-on- year rise of 1.5%.
- Oil demand for transport is forecast to increase 2.1% owing to a steady rise in automobile sales and an increase in international air transport, despite the persistence of high oil prices.
- Oil demand for industrial use is forecast to rise only 1.0% from the previous year owing to a drop in demand for fuel and a much slower rise in naphtha consumption (7.0% in 2011 →2.4% in 2012), attributable to a slower rise in the petroleum refining and petrochemical sector.
[Figure 6] Outlook on energy intensity and per-capita energy consumption
- Naphtha accounts for 45% of total oil demand, and it is forecast to lead the increase in overall oil demand. Consumption, though rising at a slower rate, is still expected to rise more rapidly than consumption of other petroleum products.
LNG demand is forecast to rise 4.2%.
- LNG demand for power generation, which accounts for 45% of total consumption of LNG, is expected to rise 4.7% and lead the rise in overall LNG demand.
- LNG demand for power generation is expected to indicate sound growth due to a sharp increase in electricity demand and a shortage in base-load power generation facilities, despite expansion of nuclear power plant capacity of 2 million kW in 2012.
- Town gas is forecast to record an increase rate of 3.0%, with town gas for industrial use leading the overall rise in demand.
- Town gas for industrial use will rise 4.5% and lead the increase in demand in 2012. But this is a sharp deceleration from the 11.1% increase in 2011. Demand in the residential/commercial/public sector is expected to be about the same as during last year.
Many factors are serving to increase demand for electricity, such as the low charges and use of more electric-powered equipment. However, demand is expected to increase at a slower rate of around 3.5% as a result of the slowdown in industrial production and the government’s strong electricity demand management policies.
- Electricity demand for industrial use is expected to rise 4.9% year-on-year. This would be a substantial lower rate of increase than in 2011, but electricity demand for industrial use will continue to lead the rise in overall electricity demand.
- The rate of increase in electricity demand for residential/commercial use is expected to rise slightly in 2012 owing to low consumption in 2011 stemming from low temperatures in the summer and high temperatures in the winter.
Nuclear power generation is forecast to rise 4.0% as new facilities come on-line.
- Singori Nuclear Power Plant Unit 2 (1 million kW) and Sinwolseong Nuclear Power Plant Unit 1 (1 million kW) are expected to commence commercial operations in June.
This translates into an expansion in facility capacity of 10.7% from the end of last year.
- The cessation of operations of Gori Unit 1 (590 thousand kW) for a safety test and the
end of the design life (November) of Wolseong Unit 1 (680 thousand kW) will partially offset the increases in nuclear power generation elsewhere.
Outlook on share of consumption by each energy source
Oil’s share of consumption dropped to below 50% in 2002 and has continued to go down. It is forecast at 38.1% for 2012.
The share taken up by coal consumption increased from 23.0% in 2001 to 28.9% in 2011 as a result of a steady rise in coking coal consumption for industrial use and coal consumption for power generation.
- The share accounted for by coal will likely decrease for the first time in the 2000s in 2012 since there will be no expansion of coal-based power generation facilities and demand for industrial use will likely increase more slowly.
The share accounted for by LNG has been rising sharply since 2000. This is attributable to a sharp rise in LNG demand for power generation resulting from a rapid increase in electricity demand and a lack of expansion of base-load power generation facilities.
The share of primary energy occupied by nuclear power peaked at 16.1% in 2005 and
2. Outlook on Energy Demand
[Figure 7] Share accounted for by each energy source
then declined through 2011 as no facilities were expanded or built. The share is expected to rise to 12.1% in 2012 as a result of a substantial rise in facility capacity.
Final energy demand is forecast to be stagnant in 2012, according to the new energy conversion factor.9)
Consumption is forecast to rise at a slower rate in 2012 as a result of the slowdown in economic growth, triggered by the global economic downturn, and the high oil prices.
Energy demand in the industrial sector is expected to fall 0.3% (it is forecast to rise 1.8%
when the previous energy conversion factor is applied) due to reduced consumption of petroleum products for fuel and anthracite, etc., although consumption of electricity, naphtha, town gas, etc. is expected to rise.
- Demand of the industrial sector is expected to rise at a slower rate owing to a slower rise in demand for non-energy oil (naphtha, etc.) and electricity, etc., which have recently led the rise in overall energy demand.
Energy demand in the residential, commercial, and public sector is expected to rise only slightly - less than 1% - unless unusual weather occurs.
Energy consumption in the transport sector is expected to change little from last year due to the economic slowdown and the persistence of the high oil prices.
Final energy consumption structure by sector
The share of energy consumption taken up by the industrial sector remained between 55 and 56% until 2005. It began to rise afterwards and will likely reach 60.5% in 2012 (60.7% when the previous energy conversion factor is applied).
- The increase in the share taken up by the industrial sector is a result of steady growth of energy-intensive industries including the steel and petrochemical industries and very strong growth of the fabricated metal industry, which is also very energy-intensive.
9) When the previous energy conversion factor is applied, the rate of increase in final energy demand will likely be 1.7% (1.4% when excluding energy demand for raw material use). The forecast for the industrial, transport, and residential/commercial/public sectors is 1.8%, 2.2%, and 0.8%, respectively.
The transport sector accounted for 21.0% of consumption in 2006, but its share decreased steadily afterwards. It fell to 18.4% in 2011 but is forecast to slightly rise to 18.5% in 2012.
- The drop in the share of consumption of the transport sector is a result of a substantial drop in the rate of increase in petroleum product consumption for transport in response to the sustained rise in international oil prices since 2003.
The share of consumption occupied by the residential/commercial/public sector, where most energy is consumed for heating and cooling purposes, tends to vary with temperature fluctuations in the summer and winter.
- The percentage of consumption accounted for by the residential/commercial/public sector indicated a steady downward trend in tandem with strong energy consumption by the industrial sector since 2005. This trend is expected to continue during the forecast period.
2. Outlook on Energy Demand
[Figure 8] Share of final energy demand occupied by each sector
Notes: 1) The figures for 2012 were calculated according to the new energy conversion factor (changed on December 30, 2011). When the previous energy conversion factor is applied, primary energy demand indicates a year- on-year increase of 2.1% (2.0% when excluding energy demand for raw material use).
2) Figures in parentheses are year-on-year growth rates (%). p indicates that the figures are preliminary; e indicates that the figures are forecasts.
Category 2011p 2012e
1/4 2/4 3/4 4/4 Annual 1/4 1st half 2nd half Annual
<Table 1> Primary energy consumption trends and outlook
30.4 28.8 32.2 33.4 124.8 31.1 60.1 65.3 125.4
(-0.8) (3.1) (6.4) (9.5) (4.6) (2.3) (1.5) (-0.5) (0.5)
24.2 22.3 25.8 26.8 99.1 24.8 47.2 52.1 99.3
(3.7) (2.6) (5.6) (10.2) (5.6) (2.6) (1.5) (-1.0) (0.2)
206.7 183.2 201.1 210.3 801.3 209.1 398.1 415.4 813.5
(4.0) (-5.3) (4.9) (0.0) (0.9) (1.2) (2.1) (1.0) (1.5)
110.3 90.8 101.6 108.8 411.4 108.0 202.9 211.3 414.2
(-0.5) (-11.9) (0.2) (-6.5) (-4.7) (-2.1) (0.9) (0.4) (0.7)
12.2 7.3 6.3 10.0 35.8 12.6 20.3 17.0 37.3
(11.3) (9.1) (10.3) (3.0) (8.3) (3.1) (4.0) (4.4) (4.2)
1.6 1.9 3.4 1.2 8.0 1.7 3.9 4.4 8.3
(27.2) (21.4) (44.5) (-14.3) (23.3) (9.6) (13.2) (-3.8) (3.5)
37.5 38.6 38.2 35.9 150.2 37.7 75.1 81.1 156.2
(4.0) (5.8) (1.7) (-6.8) (1.1) (0.6) (-1.3) (9.5) (4.0)
1.5 1.5 1.5 1.8 6.4 1.5 3.2 3.6 6.8
(2.9) (0.8) (-3.9) (19.9) (4.9) (0.0) (4.9) (7.7) (6.3)
72.4 62.1 65.3 71.5 271.4 72.6 135.2 137.9 273.0
(4.2) (0.9) (5.7) (2.6) (3.4) (0.3) (0.5) (0.7) (0.6)
55.6 45.6 48.0 53.7 202.9 55.6 101.8 103.1 204.9
(4.8) (0.1) (4.2) (1.0) (2.6) (0.1) (0.6) (1.4) (1.0)
Coal (Million ton) -Excluding coking coal
Oil (Million bbl) -Excluding non-energy
LNG (Million ton)
Hydro (TWh) Nuclear power
(TWh) Other (Million TOE) Primary energy (Million TOE) Primary energy -Excluding
for raw materials
Notes: 1) The figures for 2012 were calculated according to the new energy conversion factor (changed on December 30, 2011). When the previous energy conversion factor is applied, final energy demand indicates a year-on- year increase of 1.7%.
2) p indicates that the figures are preliminary; figures in parentheses are year-on-year growth rates (%)
2. Outlook on Energy Demand
Industry 2011p 2012e
1/4 2/4 3/4 4/4 Annual 1/4 1st half 2nd half Annual
<Table 2> Final energy consumption trends and outlook
30.0 29.3 30.3 31.8 121.5 30.1 59.3 61.8 121.1
(3.4) (2.6) (9.3) (6.6) (5.5) (0.3) (0.0) (-0.7) (-0.3)
13.2 12.7 13.0 14.1 53.0 13.1 25.9 27.0 53.0
(5.4) (2.1) (8.1) (5.1) (5.2) (-0.5) (0.1) (-0.1) (0.0)
8.8 8.7 9.8 9.5 36.8 8.9 17.7 19.2 36.9
(2.4) (-5.8) (2.6) (-1.1) (-0.5) (1.1) (1.2) (-0.1) (0.5)
15.3 8.4 7.2 11.0 41.9 14.9 23.4 18.6 42.1
(5.1) (-2.5) (2.2) (-4.2) (0.5) (-2.6) (-1.0) (2.1) (0.4)
54.1 46.4 47.3 52.4 200.2 53.9 100.5 99.6 200.1
(3.7) (0.0) (6.7) (2.7) (3.3) (-0.4) (0.0) (-0.1) (0.0)
37.3 29.9 29.9 34.6 131.7 36.9 67.1 64.8 132.0
(4.6) (-1.6) (4.8) (0.3) (2.0) (-1.0) (0.0) (0.5) (0.2)
8.1 4.5 3.0 5.6 21.2 8.3 12.9 9.0 21.9
(6.2) (5.5) (14.8) (2.7) (6.2) (2.3) (2.0) (4.5) (3.0)
196.4 179.8 197.5 205.3 778.9 199.2 382.3 404.2 786.5
(4.1) -(4.3) (5.8) (0.5) (1.5) (1.4) (1.6) (0.4) (1.0)
100.1 87.4 98.1 103.8 389.3 98.2 187.2 200.1 387.3
(-0.7) (-10.2) (1.7) (-5.9) (-3.8) (-1.9) (-0.2) (-0.9) (-0.5)
121.4 109.0 112.5 112.2 455.1 124.7 237.1 234.6 471.7
(7.9) (5.1) (3.2) (3.0) (4.8) (2.7) (2.9) (4.4) (3.6)
10.6 10.7 10.7 11.8 43.9 10.5 21.3 22.4 43.8
(-5.5) (3.0) (13.0) (10.6) (4.9) (-1.8) (0.0) (-0.4) (-0.2)
4.4 4.2 4.3 5.2 18.2 4.2 8.4 9.3 17.7
(12.5) (-0.1) (17.9) (15.7) (11.4) (-5.8) (-2.1) (-3.2) (-2.7)
2,175 1,623 1,427 2,125 7,351 2,170 3,940 3,802 7,741
(2.9) (4.3) (1.3) (7.1) (4.1) (-0.2) (3.7) (7.0) (5.3)
Industry (Million TOE) -Excluding for raw materials Transport (Million TOE) Residential/
commercial/
Public (Million TOE)
Total (Million TOE)
Total -Excluding for raw materials Town gas (Billion m3)
Oil (Million bbl) -Non-energy
oil excluded Electricity (TWh)
Coal (Million ton) -Excluding coking coal Thermal and
other (Thousand TOE)
Notes: 1) The figures in parentheses were calculated according to the previous energy conversion factor. p indicates that the figures are preliminary; e indicates that the figures are forecasts.
2) A change to estimated population material (Statistics Korea, kosis) has resulted in changes in the per-capita consumption records of 2006 and onwards.
Category 2005 2006 2007 2008 2009 2010 2011p 2012e
Economic growth rate (%) 4.0 5.2 5.1 2.3 0.3 6.3 3.6 3.3
Increase in primary energy
3.8 2.1 1.3 1.8 1.1 7.9 3.4 0.6
consumption (%) (2.1)
Energy intensity
0.264 0.256 0.247 0.246 0.248 0.252 0.251 0.244
(TOE/Million won) (0.248)
Per-capita
4.75 4.82 4.87 4.92 4.95 5.31 5.45 5.46
consumption (TOE) (5.54)
<Table 3> Major indexes related to energy consumption
The change in the energy conversion factor triggered a 1.5%p reduction in primary energy demand in 2012.
The energy conversion factor was changed for major energy sources at the end of 2011.
The new energy conversion factor was applied to the energy supply and demand balance statistics starting in 2012.
- Article 5 (Energy Conversion Factor) of the Enforcement Regulations of the Energy Act stipulates that the energy conversion factor be defined every five years.
Based on the new energy conversion factor, primary energy demand in 2012 is forecast at 273.0 million toe, indicating a year-on-year rise of only 0.6%.
- This demand is approximately 4.0 million toe (1.5%p) lower than the demand (277.0 million toe) calculated according to the previous energy conversion factor.
- This is because of a decrease in the assigned calorific values compared to the same quantity of major primary energy sources such as coal, oil, and nuclear power.
Assuming that unusual weather will occur in the summer and winter, primary energy demand in 2012 is forecast to reach 275.9 million toe, a year-on-year increase of 1.7%.
It is assumed that the mean temperature for the third quarter will be 1℃higher than the average and that for the fourth quarter will be 1℃below the average.
- The mean temperatures in the summer and winter were clearly more extreme than the averages for 2005 and 2010.
- In 2010, the mean temperature in the third quarter was 0.7℃higher than the average temperature of the last 20 years, and the mean temperature for the fourth quarter was 1.0℃lower than the average of the same period. This data was applied when setting the temperature scenario.
3. Major characteristics
Major characteristics
3
According to the temperature scenario, primary energy demand should be approximately 1.5 million toe (0.6%) higher compared to the base case outlook (273.0 million toe).
- Final energy consumption is expected to rise by 0.6 million toe. There will likely be a substantial rise in demand in the residential/commercial/public sector, where a high percentage of energy demand is for air conditioning and heating.
- By energy source, demand for electricity, town gas, oil, and thermal energy is forecast to rise as a result of unusual weather.
- The rise in final energy demand will be met by supply of LNG and oil. Demand for
Category
Average temperature of the last 20 years
Year 2005 Year 2010
Year 2005 Year 2010 Difference with the average temperature
First quarter 1.2 -0.1 0.4 -1.3 -0.8
Second quarter 17.5 17.9 16.7 0.3 -0.8
Third quarter 24.0 24.1 24.7 0.1 0.7
Fourth quarter 7.6 6.3 6.6 -1.2 -1.0
<Table 4> Comparison between the average temperature of the last 20 years and the average temperatures of 2005 and 2010
(Unit: ℃)
(Unit: Million TOE)
Category Base case (A)
Temperature scenario (B)
Difference (B-A)
Increase rate (B/A, %)
Primary energy 273.0 274.5 1.5 0.6
- Oil (Million barrels) 813.5 814.5 1.0 0.1
- LNG (Million ton) 37.3 38.2 0.9 2.4
Final energy 200.1 201.0 0.9 0.5
- Industry 121.1 121.1 - -
- Transport 36.9 36.9 - -
- Residential/ 42.1 42.7 0.6 1.5
commercial/public
<Table 5> Energy demand scenarios for 2012
LNG, which is used for town gas production and peak-load power generation, is forecast to rise 2.4% compared to the base case, while oil demand is expected to rise 0.1%.
If abnormal weather occurs as it did in 2010, stabilizing the supply and demand for natural gas in the summer and winter this year will likely become an important issue.
Energy demand in the industrial sector remained strong but is expected to peak and begin to decline in 2012 due to the economic downturn.
Since 2007, final energy consumption has been rising the most quickly in the industrial sector.
- Energy consumption in the industrial sector rose 8.5% in 2010 and 5.5% in 2011, leading the rise in the nation’s energy consumption in the process of overcoming the currency crisis.
The manufacturing sector accounts for at least 95% of energy consumption in the industrial sector. It recorded sound growth of 5.3% year-on-year in terms of energy consumption in 2011. This is attributable to continued strength in the fabricated metal, basic metal, and petrochemical industries.10)
Energy demand in the industrial sector is expected to fall 0.3% in 2012 owing to reduced consumption of petroleum products for fuel and anthracite, despite forecasts that there will be a rise in consumption of electricity, naphtha, and town gas (It is forecast to rise 1.8% if the previous energy conversion factor is applied).
- A decline in the rate of increase in demand for non-energy oil (naphtha, etc.) and electricity, which has recently been leading the rise in energy demand, will likely result in a lower rate of increase in demand in the industrial sector than during the previous year .
There will be a decline in the rate of increase in town gas consumption for industrial use, which rose sharply as a result of raw material replacement in the petroleum refining and chemical industries.
3. Major characteristics
10) Energy consumption of the manufacturing sector excludes anthracite and new & renewable energy.
Statistics on anthracite and new & renewable energy for industrial use are compiled only for the entire industry and are not broken down by manufacturing business type.
Consumption of town gas for industrial use increased at an annual average rate of 30.3%
between 1990 and 2000. This signifies that there was a rapid spread of town gas for industrial use. The rate has slowed considerably since 2000.
Consumption increased at an annual rate of around 5% through 2006, and it has increased at an annual rate of more than 10% since 2008 (excluding 2009, during the financial crisis). The rate is forecast to fall back to 5.7% for 2012.
- A sharp rise in town gas consumption for raw material use in the petroleum refining and chemical industries is believed to be the main cause of the recent spike in town gas consumption for industrial use.
- Major oil companies replaced naphtha with town gas in response to the sharp rise in prices of naphtha, which is a raw material used for producing hydrogen in the cracking process. The high naphtha prices are a result of the high oil prices since 2008.
- Accordingly, the percentage of town gas consumption accounted for by the petroleum refining and chemical industries from among all manufacturing industries rose sharply from 8.3% in 2006 to 19.5% in 2008 and 22.5% in 2010.
- Industries are increasingly showing preference for clean fuels. They are believed to be replacing oil, etc. with town gas.
[Figure 9] Consumption of town gas for industrial use
Electricity consumption has been rising sharply but is expected to rise at a slower rate.
Electricity consumption rose quickly for several reasons: low charges, continued strength in energy-intensive industries, use of more electric-powered equipment, and convenience in use. However, the rate of increase in electricity consumption is forecast to drop slightly in 2012.
- Electricity consumption indicated annual average growth of 9.8% in the 1990s and continued to rise at an annual average rate of 6.1% in the 2000s. Consumption of electricity rose more quickly than that of any other major final energy source.
- Electricity consumption rose 10.1% in 2010, attributable to the economic recovery and unusual weather. It is forecast to record rapid growth (3.6%) in 2012 relative to other final energy sources.
A rise in electricity consumption means higher energy conversion loss, which increases primary energy demand even more.11)
- Electricity demand is forecast to remain strong for the time being as a result of sound growth of energy-intensive industries and changes in lifestyles from technological development.
The supplied reserve is declining.
Peak electricity demand has been increasing quickly since 2000, outpacing the construction of power generation facilities. Spare electricity supply is steadily declining as a result.
- From 2000 through 2011, peak electricity demand in the summer increased at an annual average rate of 5.3%. Total capacity and supply capacity increased at annual average rates of 4.7% and 4.9%, respectively, with the result that the supplied reserve margin12)dropped substantially.
3. Major characteristics
11) There is energy loss of 63.6% in the power generation sector (as of 2010). To produce 1 toe of electricity, there is a need for primary energy input of 2.74 toe.
12) Supplied reserve margin = 100*(Supplied reserve level/Peak electricity demand) Supplied reserve level = Power supply capacity - Peak electricity demand
- Peak electricity demand in the winter (December - February) rose at an annual average rate of 5.7% during the past 11 years, substantially outstripping total capacity at the point of winter peak demand, which increased at an annual average rate of 4.6%.
Peak electricity demand in the summer of 2011 and in the winter of 2011 to 2012 showed year-on-year rises of only 3.3% and 1.0%, respectively, as a result of the low temperatures in the summer and mild weather in the winter as well as electricity demand management.
- The supplied reserve level at the point of peak demand was 5.44 million kW in the summer of 2011 and 5.67 million kW in the winter of 2011 to 2012.
There is a possibility of a shortfall in electricity supply if there is unusual weather in the summer or winter or unexpected difficulties in supply.
Demand for heavy oil in Japan increased after the nuclear power accident in Fukushima, in turn pushing up international prices sharply. Korea replaced heavy oil with town gas and other energy sources, leading to a rapid decrease in heavy oil demand throughout the country.
Heavy oil consumption has been falling steeply since the second quarter of 2011. It fell 16% in 2011 alone.
Heavy oil consumption continued to fall into the first quarter of 2012, indicating a reduction of 19.8%.
A decline in heavy oil consumption triggers a rise in LNG consumption for power generation and town gas.
Forecasts on energy intensity improvements in 2012
Energy intensity (toe/million won) deteriorated in both 2009 and 2010, but improved in 2011. It is expected to fall to 0.244 in 2012, an improvement of 2.6%.
- According to the previous energy conversion factor, energy intensity in 2012 should be 0.249, an improvement of 1.2%.
The deterioration in energy intensity in 2009 and 2010 was temporary. It was a result of a rise in electricity demand and production in energy-intensive industries amid mid- to long-term energy efficiency improvements.
- The deterioration in energy intensity of 2009 was due to the surpassing of the economic growth rate (0.3%) by an increase (1.1%) in primary energy consumption, triggered by increased energy conversion loss, a result of the commencement of operation of new steel facilities and a rapid rise in electricity consumption.13)
- The deterioration in intensity of 2010 was mainly a result of base effects from sluggish energy consumption witnessed in the previous year, economic growth concentrated in energy-intensity industries, and unusual weather across all seasons.
Notes: The figure in parenthesis is the energy intensity calculated according to the previous energy conversion factor.
p indicates that the figure is preliminary; e indicates that the figure is a forecast.
Oil dependence regarding primary energy consumption is forecast to drop continually.
The share of primary energy accounted for by oil fell to less than 40% in 2010, and will likely fall to 38.1% in 2012.
When excluding non-energy oil for industrial raw material use (naphtha, asphalt, etc.), the share of primary energy accounted for by oil used as an energy source is expected to fall from 20.1% in 2011 to 19.9% in 2012.
- The share of primary energy accounted for by non-energy oil is expected to drop slightly from 18.6% in 2011 to 18.3% in 2012.14)
The Korean economy’s declining dependence on energy oil is a result of the persistently high oil prices and relative differences in prices among energy sources in Korea.
3. Major characteristics
Category 2005 2006 2007 2008 2009 2010 2011p 2012e
Energy intensity
0.264 0.256 0.247 0.246 0.248 0.252 0.251 0.244
(TOE/1 Million won) (0.248)
<Table 6> Outlook on energy intensity
13) In 2009, final energy consumption dropped 0.3%, but electricity rose by 2.4%, thus recording a relatively high increase rate.
14) With the change in the energy conversion factor, the calorific value of naphtha consumed went down 0.3%
in 2012 (the volume of naphtha consumed went up 4.1%).
- The rise in oil prices has led to less rapid increases in fuel consumption for transport and an ongoing decline in oil consumption for power generation. Oil is steadily being replaced by other energy sources such as electricity.
[Figure 10] Oil dependence and forecasts
There is a need to continually implement measures to stabilize winter and summer electricity supply and demand in 2012.
Electricity demand is forecast to rise relatively rapidly, by 3.6%, in 2012. However, the electricity supply and demand conditions that were witnessed in 2011 will likely continue in 2012 due to limited expansion of base-load power generation facilities.
- If there is unusual weather as in 2010 in the second half of this year, electricity demand will likely rise 1.7%p in the second half of the year and 0.8%p for the entire year compared to the base case (this report’s temperature scenario outlook).
- Operation of two nuclear power plants (Singori Nuclear Power Plant Unit 2, Sinwolseong Nuclear Power Plant Unit 1) is slated to commence in the second half of this year, but there are no plans for expansion of bituminous coal-fired power generation facilities.
- The uncertainty as to whether operation of Gori Unit 1 (590 thousand kW), which has been stopped for a safety test, will be resumed and the end of the design life (November) of Wolseong Unit 1 (680 thousand kW) are limiting factors on electricity supply capacity.
There is a need to boost capacity and continually implement electricity demand management policies in order to stabilize electricity supply and demand in 2012.
- There are needs to continually implement a cost principle-based electricity charge system and to present a mid- to long-term roadmap that would build consumer trust in the electricity charge policy.
- There is a need to devise measures to secure maximum electricity supply capacity in such ways as using emergency electric generators in the private sector until 2015, considering that there will be no spare electricity supply until 2015.
- If necessary, the electricity supply/demand stabilization measures of 2011 (reduce peak demand, cap heating temperatures, etc.) should be improved.
- PR should be stepped up to ensure that the general public receives information on how
4. Policy implications
Policy implications
4
to use electricity efficiently and gains understanding of the importance of reducing energy consumption, thereby minimizing wasteful energy use.
There is a need to examine LNG supply and demand conditions in 2012.
LNG consumption went up 8.3% in 2011 as a result of the rise in demand for power generation. It is expected to rise by another 4.2% in 2012.
* Rate of increase in LNG consumption for power generation: (’10) 49.6% →(’11) 8.5% →(’12) 4.7%
- The rise in LNG demand for power generation, which is used to handle peak load, is a result of the increase in electricity demand and limited expansion of base-load power generation facilities.
* Increase in electricity demand: (’10) 10.1% →( ’11) 4.8% →(’12) 3.6%
* Increase in base-load power generation facility (Annual average): (’10) 0.0% →(’11) 2.5% →(’12) 2.4%
LNG demand will likely rise significantly if there is unusual weather in the second half of 2012, a delay in the commencement of operation of new nuclear power plants, or problems in the operation of existing base-load power generation facilities.
- There will be a sharp rise in demand for LNG for both power generation and town gas if there is a deep freeze in the winter, which points to the extreme need for stabilizing LNG supply and demand in the winter.
- Fluctuations in LNG demand to replace nuclear power generation in Japan may impact supply and demand in Korea, which indicates that there is a need to closely monitor energy supply and demand conditions in Japan.
There is a need to consider whether the share of consumption taken up by energy oil is falling too fast when establishing Korea’s energy supply/demand and price policies.
Considering the huge contribution that the petrochemical industry makes to the economy, oil for fuel must be duly considered when determining the nation’s oil dependence goal.
KKEEEEII Korea Energy Demand Outlook (Volume 14 No. 2)
Printed on July 2012 Issued on July 2012
CEO of publisher: Kim Jin-woo
Registration: No. 7 on December 7, 1992
Printed by: Beomshinsa (02)503-8737
ⓒKorea Energy Economic Institute 2012 132 Naesonsunhwan-ro, Uiwang-si, Gyeonggi-do Phone: (031)420-2114, Fax: (031)422-4958
Publisher: Korea Energy Economics Institute
KEEI
KEEI
Korea Energy Demand Outlook
ISSN 2093-7199
June 2012
Volume 14, No. 2 QUARTERLY ENERGY OUTLOOK
Korea Energy Economic Institute
132 Naesonsunhwan-ro, Uiwang-si, Gyeonggi-do Phone: (031)420-2114
Fax: (031)422-4958
E-mail : webmaster@keei.re.kr Hompage : http://www.keei.re.kr
