The core goal of the roughly 3 trillion won Industrial Resources Security Fund being pursued by the government is to build an energy supply chain that remains stable even amid geopolitical crises such as a war in the Middle East. The plan is to significantly expand oil reserve capacity while improving the refining industry's structure, which is concentrated on specific regions and crude types, to establish a system that can respond more quickly and flexibly should another energy crisis strike.
According to the Democratic Party of Korea on Monday, the Ministry of Trade, Industry and Energy will pursue plans to expand national oil reserve facilities using the newly established Industrial Resources Security Fund.
The government has set a plan to secure an additional 20 million barrels beyond the current national oil reserve of 146 million barrels, following the war in the Middle East. Considering that domestic daily crude oil consumption is about 2 million barrels, this represents an amount sufficient to reserve an additional 10 days' worth of consumption. Once the fund is established and a basic plan is drawn up, construction of a new reserve base is expected to begin as early as the second half of next year. It would mark the first new reserve base in 22 years, since the completion of the Seosan base in 2005.
The fund will also be used to change the crude oil procurement structure of the domestic refining industry. Currently, about 70% of the crude oil imported by the country is Middle Eastern heavy crude. The government's policy is to lower dependence on specific oil-producing nations and broaden crude oil procurement options by supporting the construction of light crude processing facilities and the improvement of extra-heavy crude processing facilities.
Until now, domestic refiners have invested trillions of won in upgrading facilities that convert relatively cheap heavy crude into high-value-added products such as gasoline and diesel. As a result, their heavy crude processing competitiveness is regarded as the world's best, but as facilities have been optimized around heavy crude, concerns have been consistently raised that crude supply and demand flexibility declines if supply disruptions occur in the Middle East.
To improve this structure, the government plans to support the conversion to a light crude refining system. Kim Jung-kwan, Minister of Trade, Industry and Energy, also said at a recent parliamentary question-and-answer session, "Considering the overall structure of the petrochemical industry, there is a need to shift in a direction that can expand the proportion of light naphtha production." Yoo Seung-hoon, a professor at Seoul National University of Science and Technology, said, "Considering the possibility of expanding imports of U.S. light crude, there is also a need to simultaneously carry out work to convert some facilities of domestic refiners to a light crude basis."
Through the Industrial Resources Security Fund, the government is reviewing subsidies as well as financial and tax support needed for light crude facility conversion, and it plans to inject funds into facility improvements to respond to expanded extra-heavy crude imports. A Democratic Party official explained, "Energy security is not just an issue for private companies but a national strategy, so it must be backed by the government's policy and financial support."
Meanwhile, along with the Industrial Resources Security Fund, the government presented the Mega Special Zone Act, the Renewable Energy Self-Sufficient City Act, and the Industrial Artificial Intelligence Utilization Act as key legislative tasks for the second half of the year and requested the National Assembly's cooperation.
The Mega Special Zone Act is a bill to support three major mega projects, including the southwestern semiconductor cluster, and includes special exemptions from corporate regulations and improvements to living conditions. The Ministry of Trade, Industry and Energy plans to propose the bill this month in the form of lawmaker-initiated legislation through the Democratic Party, and it is understood that the bill will include some 300 regulatory exemptions and about 40 corporate support measures.
The Renewable Energy Self-Sufficient City Act stipulates procedures for developing renewable energy self-sufficient cities, a stable power supply system, investment incentives and regulatory exemptions, and the creation of settlement and education conditions. The ministry expects that, if the bill passes, it will simultaneously advance responses to the climate crisis, prevention of regional extinction, support for corporate RE100, and strengthening of energy security.
The Industrial Artificial Intelligence Utilization Act is a bill to promote the AI transformation of the manufacturing industry (M.AX, Manufacturing AI Transformation). It provides the administrative and financial basis for support such as budgets, funds, infrastructure construction, and regulatory improvements for companies pursuing M.AX.
