News & Event
- News & Event
According to Yonhap News,
(SEJONG = Yonhap News) South Korea announced an ambitious plan on Wednesday to build the world's fourth-largest oil hub and a key trading post in Northeast Asia.
The country took its first step toward building an international oil hub last year when it opened its first-ever commercial oil storage facility in Yeosu, 455 kilometers south of Seoul, which can store up to 8.2 million barrels of oil.
It is building two additional facilities in Ulsan, located some 410 kilometers southeast of Seoul, which together can store up to 28.4 million barrels of oil. The two new facilities will be completed in 2020, according to the Ministry of Trade, Industry and Energy.
Wednesday's plan, finalized at a meeting of the trade-investment promotion committee, deals largely with how those facilities will be used to create a regional oil trading post, also focusing on how to attract international oil companies and traders.
First, the government will provide part of its state storage units to bring the country's total capacity for commercial use to 56.6 million barrels, ahead of Singapore's 52 million barrels.
The move will reduce the country's strategic oil reserves that can currently supply the country's total consumption for 123 days, but still remain well above 90 days' worth as recommended by the International Energy Agency, according to Kim Jun-dong, the ministry's director-general for energy and resources policy.
"There will not be a problem to the level of the country's strategic reserve as we are only seeking to utilize excessive capacity while maintaining a level recommended by the international community," he told reporters.
A need to develop an oil hub here can be seen in the growing use of oil in Asia, which currently consumes 19.2 million barrels per day, accounting for 22 percent of global consumption, while South Korea, China and Japan alone consume 19 percent of global consumption, Kim noted.
Among the three Northeast Asian countries, South Korea is most competitive in terms of shipping and oil refining costs, which currently stand at US$1.37 and $2.33 per barrel, respectively. They compare with China's $1.38 and $6.12 and Japan's $1.43 and $3.12 for shipping and refining, according to the ministry.
Efforts to build a regional oil trading post will include deregulation aimed at allowing blending, or production, of oil products, as well as attracting global oil trading companies.
The ministry plans to revise related laws to offer tax incentives to oil trading companies, under which major oil traders will be exempt from the country's 22 percent corporate tax for five years and then benefit from a 50 percent cut for an additional five years.
A revision to government regulations on safe management of hazardous materials, set to go into effect in December, will allow oil traders to more freely blend crude oil to create products of various grades and prices.
Currently, they are required to obtain prior approval for any change to the quality or quantity of products in their oil tanks.
Copyrights Yonhap News. All Rights Reserved. Source Text
Source: Yonhap News (Mar. 11, 2014)