Update On The Update On The ROK Energy ROK Energy Sector and The Sector and The ROK LEAP ModelROK LEAP Model

May 13, 2005May 13, 2005

I. Update on the ROK Energy

Sector

II. The ROK LEAP Model

Major Energy & Economic IndicatiorMajor Energy & Economic Indicatior

Indicator 1981 1990 1995 2002 2004 Avg. Annual Growth Rate (%)

‘81-‘90 ‘90-‘04 ‘81-‘04

Primary Energy Consumption

(million toe)45.7 93.2 150.4 208.6 220.8 8.2 6.4 7.1

Per Capita Energy Consumption (toe)

1.18 2.17 3.34 4.38 4.58 7.0 5.5 6.1

Energy/GDP (toe/1,000 USD)

0.29 0.27 0.31 0.31 0.28 -0.8 0.3 -0.2

CO2 Emissions

(million t-CO2)135.9 239.0 366.9 466.2 - 6.5

(‘90-‘02)

5.7

(‘81-‘02)

5.8

CO2 Emissions

Per Capita (t-CO2)3.51 5.57 8.14 9.79 - 5.3

(‘90-‘02)

4.8

(‘81-‘02)

4.8

GDP (trillion won) 122.4 263.4 377.4 524.7 566.2 8.9 5.6 6.9

Population (million) 38.7 42.9 45.1 47.6 48.2 1.1 0.84 0.96

Note: GDP is constant value of 1995.

Consumption Shares by Source(2004)Consumption Shares by Source(2004)

2004220.8 mil. toe

LNG12.9%

Nuclear14.8%

Hydro0.7%

Coal24.1%

Petroleum45.6%

Firewood &Others

2.0%

Trend of Primary Energy Consumption by SourceTrend of Primary Energy Consumption by Source

Primary Energy Consumption

0

40

80

120

160

200

240

70 73 76 79 82 85 88 91 94 97 2000 2003

(mil. toe)

Coal Petroleum LNG Hydro Nuclear Firewood & Others

Trend in Consumption Shares (198119902004, %)

• Oil : 58.1 53.8 45.6 • Coal : 33.3 26.2 24.1

• LNG : 0 3.2 12.9 • Nuclear : 1.6 14.2 14.8

Trend in Consumption Shares (198119902004, %)

• Oil : 58.1 53.8 45.6 • Coal : 33.3 26.2 24.1

• LNG : 0 3.2 12.9 • Nuclear : 1.6 14.2 14.8

Final Energy Consumption by SectorFinal Energy Consumption by Sector

2004166.7 mil. toe

Residential/Commercial

21.4%

Industrial55.8%

Public &Others

2.1%Transport20.7%

Trend in Consumption Shares (198119902004, %)

• Industrial : 44.948.155.8 • Rsd. & Cmrcl : 40.729.321.4

• Transport : 9.618.920.7 • Public & Other : 4.83.72.1

Trend in Consumption Shares (198119902004, %)

• Industrial : 44.948.155.8 • Rsd. & Cmrcl : 40.729.321.4

• Transport : 9.618.920.7 • Public & Other : 4.83.72.1

Overseas Energy DependencyOverseas Energy Dependency

0

40

80

120

160

200

70 73 76 79 82 85 88 91 94 97 2000 2004

(Bil. $)

0

20

40

60

80

100

(%)

Imports Energy Imports Oversea dependence

Major Feature(2004)

• Import Dependency: 96.6% • ME Dependency: Oil 78.1%, Gas 48.5%

• Energy Imports: $ 49.6 billion • Energy Import/Total Import: 22.1%

Major Feature(2004)

• Import Dependency: 96.6% • ME Dependency: Oil 78.1%, Gas 48.5%

• Energy Imports: $ 49.6 billion • Energy Import/Total Import: 22.1%

500500

District HeatingDistrict Heating

Heat

(Tcal)

Electricity

(Gwh)

Total

(Tcal)

Household & Building

16,268 4,626 20,246 (25.4%)

Industry 47,134 14,438 59,551 (74.6%)

Total63,402

(79.5%)

19,054

(20.5%)79,797

Shares in National’s Total

Energy- 5.5% 3.2%

Energy Production in DT(2003)Energy Production in DT(2003)

CHP ofPower Co.

42%

Municipalwaste

Incinerator6%

HOB24%

By- productof industry

2%

CHP of heatcompanies

26%

District HeatingDistrict Heating

Heat Production by Facilities(2003)Heat Production by Facilities(2003)

Fuels for Production of District HeatingFuels for Production of District Heating

Coal LNGBy-

Product gas

B-C LSWR OthersTotal

(th.toe)

Household& Building

- 73.5% - 6.8% 18.9% 0.8% 1,814

Industry 25.9% 1.3% 29.4% 24.9% 18.4% 0.1% 5,202

District Heat 19.2% 20.0% 21.8% 20.3% 18.5% 0.3% 7,016

Shares of Fuel by Sources(2003)Shares of Fuel by Sources(2003)

Projection of Energy Demand(BAU)Projection of Energy Demand(BAU)

(Unit: %)

269.3 mtoe

288.4 mtoe

198.4mtoe

1.814.1

10.5

23.0

50.6

2.6

16.2

12.3

22.4

46.5

2.7

16.6

14.5

20.5

45.7

3.1

16.7

15.4

20.1

44.8

2001 2011 2015 2020

Oil

Coal

LNG

Nuclear

RE & Others

Consumption Shares by Sector (%) : 2001 2020 • Industrial : 55.0 50.8 • Residential : 15.7 15.0 • Transport : 21.0 24.6 • Commercial : 6.3 7.5

Consumption Shares by Sector (%) : 2001 2020 • Industrial : 55.0 50.8 • Residential : 15.7 15.0 • Transport : 21.0 24.6 • Commercial : 6.3 7.5

311.8 mtoe

☞ Forecasted by KEEI

Target for Energy IntensityTarget for Energy Intensity

2003 2007 2012 2020

Target 0.303 0.277 0.248 0.198

BAU 0.303 - 0.330(2011) 0.270

Ambitious target for energy intensity set by Korean Ambitious target for energy intensity set by Korean

government in Dec. 2004government in Dec. 2004

- 88 action plans established to attain the target- 88 action plans established to attain the target

Energy / GDP( toe/million Won)Energy / GDP( toe/million Won)

Basic concept

- leasing the excess oil storage capacity to foreign oil companies

or oil-producing countries.

benefits for Korea

- raising economic efficiency in storage through collection of leasing fee

- strengthening emergency preparedness. ( Korea has the priority right to

purchase the oil stocks stored in the leased facility in case of an emergency.

  For lessee

- securing sales-push point in the center of big consuming region

(Korea, Japan, and China),

- enhancing marketing to customers where VLCC(very large crude oil

carrier) is unacceptable.   - Currently, KNOC is conducting the joint oil stockpiling with Norway's Statoil

(11.3 million barrels) and China's Sinochem.

International Jointing StockpilingInternational Jointing Stockpiling

Strategic(Emergency) Oil StocksStrategic(Emergency) Oil Stocks

Government Refinery Co. Total

Crude Oil 54.6 27.3 81.9

Oil Product 10.6 47.8 51.4

Total 65.2 68.1 133.9

Duration 53.7days 55.2days 108.3 days

Oil Stocks (As of Dec., 2004)(Unit:mbbl)

- Duration days are on the basis of previous imports

- Currently, Korean government has 99.1 million barrels of oil storage capacity in 8 storage bases and plans to increase the storage capacity up to 146 million barrels by 2007.

Government Goal for Renewable energyGovernment Goal for Renewable energy 2003 2006 2011

supply Share(%) supply Share(%) supply Share(%)

Solar thermal 41.4 0.93 101.5 1.45 318.1 2.39

Bio-energy 197.0 4.43 495.0 7.07 1,050.0 7.87

Waste-energy 3,080.0 69.20 5,050.0 72.13 7,540.0 56.54

PV 2.7 0.06 21.9 0.31 341.2 2.56

Wind Power 13.1 0.29 125.9 1.80 1,311.4 9.83

Small Hydropower 50.0 1.12 111.0 1.59 446.0 3.34

Fuel Cell - - 0.4 0.01 147.1 1.10

Geo thermal 0.8 0.02 12.1 0.17 160.8 1.21

Ocean energy - - 0.7 0.01 431.5 3.24

Hydrogen - - - 1.3 0.01

Coal - - - 374.6 2.81

Sub-Total 3,385 76.05 5,919 84.54 12,122 90.90

Hydro power 1,066 23.95 1,082 15.45 1,213 9.10

Total 4,451 100.00 7,001 100 13,335 100

Share of TPEC 2.06% 3.0% 5.0%(BAU 2.6%)

Electricity from renewable energy (Gwh) 5,134 7,835.6 25,354

Renewable energy share in generation 1.8% 2.4% 7.0%

The ROK LEAP Model

BAU Path

Assumptions of BAU Path - Base Year: 2001 - Timeline: 2001 – 2030

Item 2001 2010 2020 2030 Annual Increase (%)

’01-’10 ’10-’20 ’20-’30

GDP (1995 T KRW)

493.4 768.4 1,165.0 1,629.1 5.0 4.3 3.4

Population(Million)

47.3 49.6 50.7 50.3 0.5 0.2 -0.1

Households(Million)

14.9 16.9 18.2 19.1 1.5 1.0 0.5

Person per Household

3.2 2.9 2.8 2.6 -1.0 -0.5 -0.5

Demand in BAU Path

Residential

- Cooking

Demand in BAU Path

Residential

- Space Heating

Demand in BAU Path

Residential

- Appliances

Demand in BAU Path

Industrial

Demand in BAU Path

Transportation

Demand in BAU Path

Transportation - Household Vehicles

Demand in BAU Path

Transportation - Mass Transit & Freight

Final Energy Demand in BAU Path

Imports of Primary Energy in BAU Path

National Alternative Path

Assumptions of National Alternative Path - Most assumptions of National Alternative Path are the same to those

for BAU Path, except electricity generation projections. - Emphasizing renewable energy: Share of electricity generation by renewable is assumed to be 7.0%

over total electricity generation in 2011, comparing with 2.6% that is in the national plan.

- Decreasing new deployment of nuclear power plants after 2015: Strong resistance against new deployment of nuclear power plants by

local communities has been and is anticipated.

National Alternative Path Electricity capacity and generation for BAU Path