South Korea announces first oil contingency measures
SEOUL (Reuters) - South Korea said on Sunday it was implementing a multi-stage contingency plan aimed at reducing energy consumption before the skyrocketing oil prices push Asia's fourth-largest economy into a full-fledged crisis.
Prime Minister Han Seung-soo told a televised news conference the government would restrict driving of cars owned by public organizations as part of the measures, adding a tougher set of steps would be adopted if oil prices rose further.
The move marks the first direct restriction on energy consumption introduced by the world's fifth-largest oil consumer since the country imposed some restrictions on transportation in the capital during the 1988 summer Olympics held in Seoul.
"Even the (oil) producing countries are now trying to save energy costs. We need to try twice as hard as they do... it's a matter of survival," Han said.
South Korea covers almost all of its energy needs with imports and its economy, relying heavily on manufacturing of goods for exports, lags far behind the more advanced countries in energy efficiency.
"We expect to spend $111.2 billion this year on crude oil imports, up from $60.3 billion last year, due to prices that have more than doubled," Han said.
The Finance Ministry cut last week this year's economic growth target to a three-year low of 4.7 percent from 6 percent and warned the country would post its first current account deficit in 11 years of about $10 billion due to high oil prices.
Finance Minister Kang Man-soo told the news conference the country's economic forecasts, based on the assumption of prices at $120 a barrel on average for the second half, would have to be revised further if crude oil continues to gain.
MORE SYMBOLIC UNTIL NOW
The measures -- restricting driving, raising average temperatures at government-owned buildings, and regulating use of power at public facilities -- would help reduce energy consumption by the public sector by 6.6 percent.
But they are still largely symbolic and the total amount of energy saving will be small because they apply only to the public sector, which accounts for less than 4 percent of South Korea's total energy consumption.
The government will consider imposing restrictive measures in the private sector only when the supply of crude oil is disrupted. The current emergency oil stocks at 139 days will be used in case of the supply halt, it said.
"The next set of measures will come when Dubai crude prices hit $170 a barrel," Finance Minister Kang Man-soo told the news conference.
The price of Dubai crude, which South Korea uses as benchmark, was last quoted at $140.55 a barrel, up nearly 60 percent so far this year.
The plans follow a 10.5 trillion won ($10.01 billion) package introduced last month to ease the financial burden of high oil prices on low-income individuals and self-owned businesses.
Han said the government would encourage the corporate sector , active in oil and gas exploration projects abroad, to secure steady supply of energy reserves.
Last month, the government announced it would invest 19 trillion won in state-run Korea National Oil Corp (KNOC) to increase production capacity six-fold and make it more competitive in securing foreign reserves.
KNOC usually leads consortiums for overseas energy exploration projects involving domestic refiners.
If the expansion project is successful, South Korea's self-sufficiency level for crude oil could reach about 25 percent, up from its initial aim of 18.1 percent by 2012.
($1=1048.6 Won)
(Editing by Yoo Choonsik and Tomasz Janowski)
