22-07-08 South Korea is seeking to boost its strategic oil stockpiles by 33 % by 2010 to cushion against high international crude prices and possible supply disruptions. State-run Korea National Oil Corp. has unveiled a plan to increase state-held oil stockpiles to 101 mm barrels by 2010 from current 76 mm barrels. The government also plans to boost its storage of foreign oil to 40 mm barrels by 2010 from current 35 mm barrels.
"The government aims to hold a total of 141 mm barrels by 2010 in state tankers," a KNOC official said.

KNOC currently has a crude stockpile of 76 mm barrels, which can meet its oil needs for 69.5 days in case of emergency, the official said. The private sector's oil reserve stands at 81 mm barrels for 66.8 days' supply. The country's oil stockpiles for 136 days' supply is larger than the International Energy Agency's recommendation of 90 days worth of reserves.
But fears are rising about soaring crude prices and possible import crunches because energy-poor South Korea buys almost its entire requirements of oil, mostly from the volatile Middle East. In addition, the government has promised to release state-held strategic reserves under a contingency plan in case the country's crude imports fall by more than 10 % during supply disruptions.

But the government has failed to increase its oil stocks since late last year due to surging international prices and the weaker won against the dollar. Earlier this year, the government aimed to buy 2.25 mm barrels at $ 82/barrel. But the benchmark Dubai crude oil sharply gained to reach over $ 140/bbl, embarrassing crude procurement officials.
Government officials acknowledged they could barely meet this year's crude purchase target due to the high prices.
"We are going to lower this year's crude purchase volume," a KNOC official said.

The government may delay the purchase plan until next year in hope of lower prices, an energy ministry official said. But KNOC officials said they could store more foreign oil in their tankers, which could be used during an emergency.
"This year, we clinched deals to store an additional 7.9 mm barrels of foreign oil," the KNOC official said. The storage leasing deals include 3 mm barrels from Shell, the official said.

Including the latest deals, South Korea stores 35 mm barrels of foreign oil, including 13 mm barrels of Norwegian oil, 2.7 mm barrels of Chinese oil, 6 mm barrels of Algerian oil and 2 mm barrels of Kuwaiti oil. South Korea has first access to the foreign oil in an emergency situation, KNOC officials said.
South Korea's current oil storage capacity stands at 138 mm barrels, with an above-land facility in Seosan where 14.6 mm barrels is stored. The country plans to expand storage to stock more state-held oil stocks.

South Korea has decided to invest won 19 tn ($ 18.7 bn) by 2012 in KNOC to help expand its production capacity six fold to 300,000 barrels of oil equivalent/day, part of President Lee Myung-Bak's drive to make the state oil company bigger and boost itscompetitiveness in developing oil reserves overseas and cut dependence on energy imports.
South Korea imported a total of 873.5 mm barrels of crude oil in 2007, down 1.7 % from the previous year when it bought 888.8 mm barrels. The world's fifth-largest crude importer plans to import 909 mm barrels this year.