BMI's Executive Summary

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The latest South Korea Oil & Gas Report from BMI forecasts that the country will account for 8.23% of Asia Pacific regional oil demand by 2011, while making no appreciable contribution to supply. Asia/Pacific regional oil use of 21.4mn barrels per day (b/d) in 2001 reached 24.84mn b/d last year. It should average 25.68mn b/d in 2007 and then rise to around 29.04mn b/d by 2011. In terms of natural gas, the region last year consumed 409bcm, with demand of 620bcm targeted for 2011, representing growth of 51.4% between 2006 and 2011. Production of 329bcm in 2006 should reach 478bcm in 2011 (+45.0%), but implies net imports rising from 80bcm per annum to 142bcm. South Korea’s share of gas consumption in 2006 was 8.35%, while its share of production was minimal. By 2011, its share of gas consumption is forecast to be 7.04%.

Global oil demand growth is expected to be around 2.0% this year, with Asia Pacific and the CEE regions dominating. This is an encouraging rate of market expansion given a relatively uncertain economic picture and high commodity prices. Our oil price projections for 2007 as a whole are revised upwards from the last quarterly report. We are now assuming an OPEC basket price average of US$59 per barrel, compared with the US$55 estimate provided by our last two quarterly reports. Based on recent price differentials, this implies Brent at US$62.83, WTI averaging US$61.25/bbl and Urals at US$59.42/bbl.

South Korean real gross domestic product (GDP) growth is forecast by BMI at 4.7% for 2007, down from 5.0% in 2006. We are assuming 5.1% growth in 2008 and 4.9% in 2009, followed by 4.7% in 2010 and 4.6% in 2011. Several South Korean oil companies, including state interests, are engaged in securing international upstream production, but the domestic market offers little potential for oil or gas. Oil consumption is forecast to increase by no more than 1% per annum to 2011, implying demand of 2.39mn b/d by the end of the forecast period. Gas demand is forecast to rise from last year's 34.2bcm to 43.6bcm by 2011, with the bulk of the fuel being imported in the form of liquefied natural gas (LNG).

In the BMI Business Environment Ranking matrix, South Korea receives a higher composite score of 38, which promotes it to second out of 14 states included in the Asia/Pacific region. The overall business environment can be considered very attractive in a regional context, thanks almost exclusively to exceptionally low levels of perceived political and economic risk, progress in oil industry deregulation and a well-developed competitive environment. Although gas volumes are rising from a very low base, it has very limited hydrocarbons prospects. The country has a competitive downstream oil sector, involving mainly local companies that are going through a phase of consolidation. The country's reserves to production ratio (RPR) is above average, but the actual volumes involved are too small to interest international oil companies (IOCs).

Contents

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Chapter 1 - Executive Summary

Chapter 2 - SWOT Analysis

South Korea Political SWOT

South Korea Economic SWOT

South Korea Business Environment SWOT

Chapter 3 - Regional Market Overview

Asia/Pacific Region

Table: Asia/Pacific Oil Consumption (000b/d)

Table: Asia/Pacific Oil Production (000b/d)

Table: Asia/Pacific Oil Refining Capacity (000b/d)

Table: Asia/Pacific Gas Consumption (bcm)

Table: Asia/Pacific Gas Production (bcm)

Table: Asia/Pacific LNG Exports/(Imports) (bcm)

South Korea

Chapter 4 - Business Environment Rankings

South Korea

Asia/Pacific Region

Chapter 5 - South Korea Business Environment Ranking

Economics – Long-Term Risk

Politics – Long-Term Risk

Oil & Gas Growth

Oil/Gas Reserves

Licensing/Regulation

Competitive Environment

Chapter 6 - Business Environment Overview

Political Risk Summary

Economic Risk Summary

Business Environment Risk Summary

Legal Code/Corruption

Foreign Direct Investment

Tax Regime

Chapter 7 - Oil Market Outlook

Assessing The Risks

Table: Crude Price Forecasts 2007

Revised Forecasts

Table: Oil Price Forecasts

Chapter 8 - Regional Supply and Demand

Asia/Pacific

Table: Oil Production (000b/d) – Asia/Pacific

Table: Oil Consumption (000b/d) – Asia/Pacific

Chapter 9 - Global Picture

Table: Global Oil Consumption (000b/d)

Table: Global Oil Production (000b/d)

Chapter 10 - Industry Forecast Scenario

Oil and Gas Reserves

Oil Supply and Demand

Gas Supply and Demand

LNG

Refining and Oil Products Trade

Revenues/Import Costs

Table: South Korea Oil & Gas – Historic Data & Forecasts

Other Energy

Table: South Korea Other Energy – Historic Data & Forecasts

Key Risks to BMI’s Forecast Scenario

Chapter 11 - Economic Outlook

Table: GDP, Output & Population

Chapter 12 - Regional Case Study – ConocoPhillips

Table: Exploration And Production 2005

Table: Commercial Realisation – Refining And Marketing 2005

Chapter 13 - Competitive Landscape

Executive Summary

Table: Key Players – South Korean Oil & Gas Sector

Overview/State Role

Table: Key Upstream Players

GS Caltex – Summary

SK Corporation – Summary

S-Oil – Summary

Kogas – Summary

Table: Key Downstream Players

Hyundai Oilbank – Summary

Chapter 14 - BMI Forecast Modelling

How We Generate Our Industry Forecasts

Energy Industry

Cross checks

Sources

Network of Asian Oil & Gas Sources

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BMI's Asian Oil & Gas Reports are based on an extensive network of multilateral organisations, government departments, oil & gas industry associations, chambers of commerce and company reports. Information sources include: