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South Korea, Asia’s fourth-largest economy, is struggling with recurring energy supply shortages. Despite the issue, country officials pledged to drastically scale back nuclear power at the World Energy Congress meeting on October 13, 2013. Nuclear energy accounted for 26.4% of power generation capacity in 2012, and was expected to reach 41% by the year 2035. The revised plans, despite the construction of new plants, call for the number fall between 22% and 29%.

South Korea becomes the latest country to stray from nuclear power after the Fukushima disaster. A scandal in the industry has worsened matters, and 100 officials were indicted on corruption and bribery charges on October 11, 2013. A government probe discovered officials faked a total of 2,287 quality-control certificates in 28 separate operating and offline plants. The public is also turning against nuclear use. A recent poll said 63% of Koreans consider nuclear reactors unsafe, compared to 54% only one year ago.

South Korea imports virtually all of its energy, and is currently the second-largest importer of liquefied natural gas (LNG) in the world according to the Energy Information Association (EIA). Estimates say power demand will surge 60% by 2027. A Hyundai Research Institute report says South Korea consumes power at almost twice the average of countries in the Organization for Economic Co-operation and Development relative to the size of its economy. Korea’s rapid economic growth has reached “an excessive level” of required power supply, and the energy sector is struggling to keep pace.

Yoon Sang Jick, a government official, said the government doesn’t want the new energy makeup to be too lopsided towards one particular fuel. His email response, courtesy of Bloomberg, said, “The government will switch the policy direction to reflect changing circumstances regarding nuclear plants and address other problems including power shortages,” Yoon said, without referring to contract proposals from LNG suppliers.

Analysts, however, are convinced LNG is the front runner to meet the energy needs. LNG’s outlook remains strong, and a Goldman Sachs report on September 23, 2013 estimates 180 tons will be needed by 2025.

“This is part of a trend we’re seeing in Japan, Taiwan and now South Korea,” Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co., said. “We are seeing certainly a slowdown in plans for nuclear expansion, and LNG remains the beneficiary of this trend.”

Jang Gil Soo, a special adviser for Korea Electric Power Corp. the country’s monopoly electricity distributor, said, “The new long-term energy policy is heavily focused on expanding the use of LNG. It doesn’t have any restrictions, like coal, which creates environmental problems.”

Peter Coleman, the chief executive officer of Woodside Petroleum Ltd. (ticker: WPL.AX), Australia’s second-largest oil and gas producer, said the energy transformation will encourage the nation to sign new liquefied natural gas supply deals. Coleman said companies will eagerly sign off on Korea’s gas laws due to the huge opportunity, but an agreement much be reached first. “There’s such a long lead time on this stuff that the earlier you can get clear policy direction, the earlier that the buyers – whether it be Korea Gas Corp. or others – are able to act,” he said. “If buyers are not willing to make those commitments, then projects won’t get built. People don’t build LNG projects on speculation.”

Royal Dutch Shell (ticker: RDS.B) is also a consistent supplier of LNG, and CEO Peter Voser expressed interest in expanding a business relationship with the country.

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Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.