The government this week disclosed a long-term blueprint for overseas resources development that aims at enhancing the country’s “resources security.”
The 10-year vision for 2020-2029 envisions strengthening the role of private companies in pushing for resources development projects abroad by providing more effective and diversified support to them.
Over the past decade, Korea has continuously retreated from projects to develop oil and other natural resources overseas.
Testifying to the downward trend, the amount of state budget allotted to help finance off-shore resources development projects decreased from 309.3 billion won ($251.7 million) in 2010 to 36.7 billion won in 2019, according to government data. Various tax benefits for such projects were also mostly repealed during the cited period.
The country made aggressive efforts to explore resources abroad during the 2008-2013 tenure of corporate executive-turned-President Lee Myung-bak.
But most of the resources projects initiated by the Lee government were scrapped or became subject to thorough scrutiny under his successor Park Geun-hye’s administration.
The incumbent government of President Moon Jae-in, who took office in May 2017, has also remained negative about overseas resources development. The prosecution has reopened its investigation into alleged corruption cases involving resources development projects.
The blueprint unveiled Tuesday by the Ministry of Trade, Industry and Energy is seen as heralding a shift from its negative position on the matter.
What prompted the change seems to be an enhanced awareness of the need to secure a stable supply of natural resources amid growing uncertainties in global conditions.
Instability in the global supply of resources is rising due to the novel coronavirus pandemic coupled with geopolitical risks in the Middle East and South China Sea, along with rising tensions between the US and China.
South Korea remains more vulnerable to external shocks, as it relies on imports for 94 percent of its energy sources. The country is the world’s third-biggest importer of liquefied natural gas and eighth-largest consumer of oil.
Announcing the latest blueprint for resources development, which is renewed every five years, the government said it would put focus on guaranteeing the security of resources supply rather than setting quantitative goals.
This approach seems to be trying to strike a balance between opposite positions of the previous administrations.
Under the Lee government, state-funded energy firms recklessly participated in massive resources development projects abroad and suffered large amounts of losses. By contrast, the Park administration placed excessive restrictions on endeavors to explore resources abroad.
The blueprint unveiled this week envisions pushing for public-private partnerships, in which public firms implement exploration works with big price tags that carry high risks, while private enterprises are allowed to join in the stages of development and production.
It is desirable to establish such platforms, which could help reactivate overseas resources development by making it possible for public and private companies to share risks and profits.
The government will increase financial support and revive tax benefits to encourage private firms to participate in resources development abroad. It also plans to build a database by 2022 to give them access to comprehensive information on resources explorations implemented by state-funded corporations.
The Moon government’s active approach to overseas resources development comes at an opportune time, as the price of oil and other energy resources remains low due to slumping global demand amid the pandemic. It needs to accelerate the implementation of envisioned plans.
From the viewpoint of energy security, the Moon government is also required to reconsider its policy to phase out nuclear power generation.
A draft plan for the nation’s basic energy policy for 2020-2034, announced last week, calls for reducing the number of nuclear power reactors in South Korea from the current 25 to 17 by 2034. Nuclear power’s share of the country’s electricity generation is also projected to decrease from nearly 19 percent to about 10 percent over the cited period.
Renewable energy, which now accounts for 15.1 percent of power generation, is set to increase its proportion to 40 percent by 2034.
The plan drawn up by a working group under the Energy Ministry also suggests replacing most of the 30 coal-fired power plants whose operational life cycles expire by 2034 with stations that run on LNG.
It is more reasonable to make up for the power shortage to be caused by the closure of coal-fueled plants with nuclear energy.
Nuclear power generation is much cheaper than LNG-produced electricity. More importantly, the supply of uranium to fuel nuclear reactors is stable, as its import sources are diversified and local providers have stockpiles enough to run all nuclear power stations for at least two years.