CAPITAL: Seoul
MONETARY UNIT: Won
REFINING CAPACITY: 2.54 million b/cd
OIL PRODUCTION: None
OIL RESERVES: None
GAS RESERVES: None
The financial crisis that swept Asia in 1997 and weakened oil demand in the affected countries raised questions about an aggressive refinery construction program in South Korea.
At the beginning of 1997, Korean refiners had plans to add 73,000 of fluid catalytic cracking capacity, a 35% increase, and 120,000 b/d of desulfurization capacity, a 70% gain, by 2000.
A rapid rise in car ownership in the 1990s had left refiners with an oversupply of fuel oils but the need to import lighter products such as gasoline and diesel. Gasoline demand, which had increased 20%/year since 1984, had been expected to grow at 15%/year through 2000.
The economic slump of 1997 and its effect on oil demand growth, however, made an oversupply of gasoline and diesel likely for at least a while.
The market reversal occurred while domestic competition was intensifying with Korea`s slow phase-in of deregulation. Oil prices were ostensibly deregulated at the start of the year, although companies for the first 6 months had to notify the government of their plans to change prices. Another move that took effect in 1997 enabled companies with majority Korean ownership to import oil products for resale by simply registering with the government rather than having to secure licenses.
Deregulation of South Korea`s petrochemical industry in 1990 sparked a flurry of construction, which doubled ethylene capacity to 3.5 million metric tons/year by 1993. Before the financial crisis, ethylene capacity had been expected to reach 5.1 million tons/year in 2000.
Pipelines, LNG
In the last quarter of 1997, state-owned Daehan Oil Pipeline Corp. commissioned a 593 mile products pipeline and storage terminal at Songnam, near Seoul. The terminal can store 1.97 million bbl and load 186,000 b/d of oil. The pipeline transports products from five of Korea`s six refineries.
Also late in 1997, Korea Gas Corp. let a basic engineering and consultancy contract to M.W. Kellogg Ltd. for an LNG receiving terminal at Tong Young. Capacity of the regasification facility was eventually to reach 6 million tons/year.
