Seoul seeks to handle oil issue with neighbours

Sep 20, 2005 02:00 AM

by Kim Sung-jin

Economic and energy ministry bureaucrats and petroleum and oil refining industry representatives of three Northeast Asian countries jointly called for regional cooperation to cope with soaring oil prices.
Some 250 representatives of petroleum industries of China, Japan and South Korea gathered in Seoul to attend the “2005 Northeast Asia Petroleum Forum’’ jointly organized by the Federation of Korean Industries (FKI) and the Korea Energy Economics Institute (KEEI).

At the biennial multinational event held in southern Seoul, the three countries discussed the serious impact of soaring oil prices on Asian economies, especially Korea, Japan and China. They reached the conclusion that the Northeast Asian economies should join forces to reinforce the region’s energy security.
“The global petroleum market has shown its structural limitations since 2004,’’ noted Vice Commerce-Industry-Energy Minister Lee Won-gul. “Korea, China and Japan’s combined petroleum consumption amounts to 14 mm bpd, and 70 % of the regional demand relies on the Middle Eastern crude. It is desperate that the Northeast Asian region address the risks of crude oil supply,’’ he added.

KEEI president Bang Ki-yual backed Lee’s assertion by saying that it is virtually impossible for an Asian country to single-handedly cope with the current difficulty arising from skyrocketing crude oil prices, thus the three countries should lay a solid foundation for energy cooperation.
Wang Tianpu, president of Sinopec, China’s second-largest oil and gas producer and its biggest oil refiner, insisted that the three countries increase dialogue and cooperation with major oil-producing countries.
“The three countries should further exchange information and improve their response capacity to cope with sudden market changes,’’ Wang said.

Fumiaki Watari, chairman of Nippon Oil Corp. said Northeast Asian countries should seek multilateral efforts to diversify its crude oil supply channels.
“I believe that it is crucialfor Northeast Asian countries to secure cheap Russian crude although we are still facing financial and technical glitches of laying a pipeline from Russia to Asia, but such a plan should be accomplished,’’ Watari said. He pointed out that Middle Eastern crude such as Dubai crude is much too expensive compared with other international crude oils such as Western Texas Intermediate and the Brent Oil, thus it is practically inevitable for Korea, Japan and China to resolve the “Asian premium’’ if they do not trim their heavy reliance on the Middle East for oil.

Currently, Asian countries pay $ 1-1.5 additional charges per barrel of oil they purchase from the Middle east compared with those paid by other American and European countries.
Watari noted that the three countries should cooperate on joint energy resource development from regions other than Middle East, such as East Siberia and Sakhalin, and reinforce oil stockpiling and joint purchase efforts to boost their bargaining power against oil-producing countries.

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