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Research Project Report

Research Project Report 상세보기
Analysis on Scenario of Available Energy Resources in Northern Sea Area
Report No. 2015-13 Research Manager Ju Mi, Song
File

Research Member : Sung Jun, Park / Eun Mi, Kim


Summary


○ Korea is highly dependent on imported oil from the Middle East, having difficulties in responding to oil price fluctuation and rapidly changing situations in the Middle East and paying Asia premium.

-  Accordingly, Korea has significant interests in energy resources of Northern Sea.
-  In addition, if energy resources are developed on the Northern Sea coast, it is required to examine the energy volume of East Asia that could be transported via the Northern Sea Route by checking if this supply route in competition with the Middle East route could be added as an alternative.   


○ If the sales price of Northern Sea crude oil is determined at the level of Dubai crude oil price, in the reference case of 80,000-ton ships, the transport cost becomes 1.63 dollars more expensive per barrel from the Sabetta port and 1.30 dollars more expensive per barrel from the Olenyok port. 
- As for 150,000-ton ships, the transport cost is shown to be 0.55 dollars and 1.35 dollars higher per barrel at the Sabetta port and Olenyok port, respectively, but as for 300,000-ton ships, the cost becomes 0.33 dollars cheaper from the Sabetta port and 0.16 dollars cheaper from the Olenyok port. 


○ If Korea puts 80,000-ton to 150,000-ton ships that are currently available to Northern Sea, 20% extra charges are applied on charter hire and operation cost. Since the speed of ships are limited at 5 Knot in the glacier section, the transport cost via the Northern Sea Route becomes higher than that of the Middle East route.
- Accordingly, it is not practical to replace current energy resources with those in Northern Sea under the situation where the transport cost via the Northern Sea Route is proven to be higher than that of the Middle East route. 
- If the extra charge is reduced to 10% and the number of navigation days is reduced thanks to the shortened length of the glacier section and the improved speed of ships, it would still difficult to reverse the transport costs but the input of over 300,000-ton ships only would be economically feasible though the transport cost is different from that of the existing sections.


○ When Korea imports gas, the cheapest transport cost is presented at the Prince Rupert port, followed by the Huston port, Doha port, Katanga and Sabetta ports.
- If Russia sells the natural gas of Northern Sea based on Henry Hub Price, the import cost from Russia is higher than that from the Sabbeta, Katanga and Prince Rupert ports but lower than that from the Huston port in U.S.


○ If Russia determines the natural gas price of Northern Sea according to Henry Hub Price, the import cost of Russia’s Northern Sea natural gas becomes cheapest, while the cost becomes highest if the price is determined based on the Russia Northern Sea price.


○ The transport costs from the Sabbeta and Katanga ports are 0.87 dollars cheaper than that from the Huston port. Since Henry Hub Price in Huston does not reflect the charge for the use of oil pipes, the Northern Sea Route could become economically feasible once the sales price of Northern Sea natural gas is determined in consideration of such conditions.


○ Under the current circumstances, it seems too early to use the Northern Sea Route to import oil and gas.
- Basically, the oil and gas of the Northern Sea coastal area should be supplied at prices cheaper than the import prices from other areas, and they would be relatively favorable not in the current situation with low oil prices but with advent of the ear of high oil prices.  
- In addition, it is required to establish the efficient market sales system by incorporating the energy resources of Northern Sea into the energy sales and supply system.  


○ However, it is hard to conclude that the import of energy resources via the Northern Sea Route is a realistically impossible alternative, and there still exists possibilities with which the Northern Sea area becomes an alternative for limited energy resources.


○ Therefore, Korea should carry out the advance preparation and studies for the commercialization of the Route including charges for icebreakers, toll fee for the Route and premium rate which are necessary to use the Northern Sea Route.

Research Project Report 상세보기
Analysis on Scenario of Available Energy Resources in Northern Sea Area
Report No. 2015-13 Research Manager Ju Mi, Song
File

Research Member : Sung Jun, Park / Eun Mi, Kim


Summary


○ Korea is highly dependent on imported oil from the Middle East, having difficulties in responding to oil price fluctuation and rapidly changing situations in the Middle East and paying Asia premium.

-  Accordingly, Korea has significant interests in energy resources of Northern Sea.
-  In addition, if energy resources are developed on the Northern Sea coast, it is required to examine the energy volume of East Asia that could be transported via the Northern Sea Route by checking if this supply route in competition with the Middle East route could be added as an alternative.   


○ If the sales price of Northern Sea crude oil is determined at the level of Dubai crude oil price, in the reference case of 80,000-ton ships, the transport cost becomes 1.63 dollars more expensive per barrel from the Sabetta port and 1.30 dollars more expensive per barrel from the Olenyok port. 
- As for 150,000-ton ships, the transport cost is shown to be 0.55 dollars and 1.35 dollars higher per barrel at the Sabetta port and Olenyok port, respectively, but as for 300,000-ton ships, the cost becomes 0.33 dollars cheaper from the Sabetta port and 0.16 dollars cheaper from the Olenyok port. 


○ If Korea puts 80,000-ton to 150,000-ton ships that are currently available to Northern Sea, 20% extra charges are applied on charter hire and operation cost. Since the speed of ships are limited at 5 Knot in the glacier section, the transport cost via the Northern Sea Route becomes higher than that of the Middle East route.
- Accordingly, it is not practical to replace current energy resources with those in Northern Sea under the situation where the transport cost via the Northern Sea Route is proven to be higher than that of the Middle East route. 
- If the extra charge is reduced to 10% and the number of navigation days is reduced thanks to the shortened length of the glacier section and the improved speed of ships, it would still difficult to reverse the transport costs but the input of over 300,000-ton ships only would be economically feasible though the transport cost is different from that of the existing sections.


○ When Korea imports gas, the cheapest transport cost is presented at the Prince Rupert port, followed by the Huston port, Doha port, Katanga and Sabetta ports.
- If Russia sells the natural gas of Northern Sea based on Henry Hub Price, the import cost from Russia is higher than that from the Sabbeta, Katanga and Prince Rupert ports but lower than that from the Huston port in U.S.


○ If Russia determines the natural gas price of Northern Sea according to Henry Hub Price, the import cost of Russia’s Northern Sea natural gas becomes cheapest, while the cost becomes highest if the price is determined based on the Russia Northern Sea price.


○ The transport costs from the Sabbeta and Katanga ports are 0.87 dollars cheaper than that from the Huston port. Since Henry Hub Price in Huston does not reflect the charge for the use of oil pipes, the Northern Sea Route could become economically feasible once the sales price of Northern Sea natural gas is determined in consideration of such conditions.


○ Under the current circumstances, it seems too early to use the Northern Sea Route to import oil and gas.
- Basically, the oil and gas of the Northern Sea coastal area should be supplied at prices cheaper than the import prices from other areas, and they would be relatively favorable not in the current situation with low oil prices but with advent of the ear of high oil prices.  
- In addition, it is required to establish the efficient market sales system by incorporating the energy resources of Northern Sea into the energy sales and supply system.  


○ However, it is hard to conclude that the import of energy resources via the Northern Sea Route is a realistically impossible alternative, and there still exists possibilities with which the Northern Sea area becomes an alternative for limited energy resources.


○ Therefore, Korea should carry out the advance preparation and studies for the commercialization of the Route including charges for icebreakers, toll fee for the Route and premium rate which are necessary to use the Northern Sea Route.

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