Joint Stockpiling and Emergency
Sharing of Oil: Lessons and Prospects
for Northeast Asia
Asian Energy Workshop
May 11-14, 2004
Beijing, China
Eui-Soon Shin
Department of Economics
Yonsei University
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APEC Vulnerability to Oil Security
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APEC region consumed 62 % of global oil in 2000
By 2020, seven of top ten oil consumers in the world would be
APEC members
APEC region is a net oil importer, and will import 54 % of oil
supply from outside sources by 2020
OECD Pacific countries (i.e., Japan, Korea, Australia, New
Zealand) depend 90 % of their oil to imports, and import
dependency will increase to 94 % by 2030
Import dependency of East Asia will increase from the current
30 % to 74 % in 2030
ASEAN will import 74 % by 2030 from the current 30%
Indonesia and Malaysia will become net importers in a few years
China’s import will increase from the current 34 % to 82 % in
2030
Most of additional oil required will come from the politically
unstable Middle East
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Oil Security Policy Measures
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Long-Term
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Diversify oil import sources
Improve oil use efficiency
Develop alternative fuels to oil
Cooperation with oil producing and consuming countries
Short-Term
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Mandatory restraining of oil consumption during emergency
Fuel switching
Disseminate accurate oil market information to discourage
hoarding or panic purchase
Drawdown of emergency oil stocks
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Emergency Stockpile Options
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Public and Private Stockholding
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Crude Oil and Petroleum Products
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U.S. SPR is financed entirely by federal government
Japan uses a small portion of oil tax revenue to cover the cost of
stockholding by JNOC
There are other varieties in Europe
U.S. holds only crude oil
Small countries hold only petroleum products
Most countries hold both crude and products
Japan and ROK set separate reserve requirement for LPG
Joint and Individual Stockpiling
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EU members are allowed for joint stockholding within EU and
outside the member states by the EU Directive
However, joint stockholding among EU member countries has not
yet been widely observed
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Lessons from ORNL Cooperative
Stock Analysis
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All the oil consuming regions in the world remain quite vulnerable
to supply disruptions
Oil stockpiling provides benefits not only to the stockpiling
economies but also to other economies with no stake in the
stockpile
This public good aspect of stockpiling justifies collaborative
initiatives in oil stockpiling
All oil consuming regions could benefit from more stockpiling
Collective groups of countries sharing a reserve prefer larger size
and achieve greater benefits than the sum of individual countries
acting alone
Asia-Pacific study shows sharply increasing benefits from the
expansion of collective reserve size
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APEC Policies on Emergency Oil
Stocks
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Different policies and measures are taken by 21 APEC
economies
U.S., Canada, Japan, Australia, New Zealand, and ROK are IEA
members and are obligated to carry oil emergency stocks
equivalent to 90 days of net imports
Taiwan and Indonesia maintains independent oil stocks
China and India are establishing (or considering to build)
strategic oil stocks
ASEAN signed the ASEAN Petroleum Security Agreement (APSA)
to establish the ASEAN Emergency Petroleum Sharing Scheme
for crude oil and/or petroleum products in terms of both
shortage and over supply
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Economics and Size Analysis of APEC
Emergency Oil Stock (major recommendations)
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Separation of emergency stocks from commercial
stocks
Minimum holding of 30 days of net import level as a
first step toward building emergency stocks
Emergency stocks could be jointly held by several
economies in order to reduce the cost of stockpiling
Temporary lease of facilities in the industrialized
economies by developing economies will alleviate the
burden of stockpiling cost
Cooperation among oil producing, importing, and
international organization would be beneficial
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Impacts of Oil Crises to the
Korean Economy
Measures taken after the two worldwide oil crises
 Establish the KNOC (Korea National Oil Corporation)
 Began strategic oil stockpiling
 Established the oil buffering fund
 Established the three-phase contingency plan as a short-term
emergency measure
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History of Strategic Oil Stockpiling
Plan in ROK
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Current Status of Strategic Oil
Stockpiling in ROK
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The ratio of cavern to tank is about 80 % to 20 % because the
maintenance cost of cavern is much cheaper
The usual capacity per each site is 20 to 40 MMB
The stockpiling project is entirely funded by ‘The special
accounts for energy and resources related projects’ raised by
imposing dues on all imported petroleum
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Oil Stock Level as of Sep. 2002 (ROK)
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Started government strategic oil stockpiling from 1980
Started mandatory stockpiling of private petroleum enterprises from 1992
(40 days of domestic sale volume to crude oil refiners and oil products
importers; 30 days requirement to LPG importers and petrochemical
enterprises)
As of September 2003, there are 107 days of oil stocks which account
for 49 days of strategic and 58 days of private stocks (based on IEA
standards)
Target for strategic oil stockpiling: 141 million barrels of oil stocks by
2007 and 146 million barrels of storage facilities by 2008
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Joint Oil Stockpiling: the case of ROK
<Basic concepts>
 KNOC leases unfilled storage facilities to petroleum
producing countries
 KNOC holds the preemptive right to purchase the
stored crude oil in case of emergency
<Diverse benefits>
 Improve the ability to cope with the oil crisis
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Increase the volume of stockpile
Contribute to diversify supply source
Decrease the financial burden of oil stockpiling
Petroleum producing countries can develop or expand
market share in Northeast Asia
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Lease Contract with Statoil
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July 1999: Started the joint stockpiling business with
Statoil (Norway’s state oil company)
July 2000: Expanded the contract volume
(8 MMB  11.3 MMB)
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China’s Strategic Oil Stockpiling Plan
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Tenth Five-year Plan for National Economic and
Social Development put forward the establishment of
Strategic National Oil Reserve
Established the National Oil Reserve Office under the
newly-established Energy Bureau, NDRC
NDRC is responsible for the formulation and
implementation of the National Oil Reserve Program
Gradually increase the reserve scale, finally to meet
the standard of IEA and other countries
Started to build oil reserve base in Zhenghai,
Zhejiang province
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Cooperative Oil and Gas Security
Measures in Northeast Asia
Joint development of oil and natural gas in
East Siberia and Russian Far East to enhance
regional energy security
 Expedite the construction of crude oil and
natural gas pipelines among NEA countries
 Joint oil stockpiling among NEA countries
 Establish NE Asian Energy Charter Treaty
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References
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APERC, “Emergency Oil Stocks and Energy Security in the APEC Region”, Tokyo, March
2000.
Ehara, Norio, “Recent Developments in Stockholding by Non-Member Countries”, IEA
Seminar on Oil Stocks and New Challenges in the Oil Market”, Berlin, 9th September 2003.
Houssin, Didier, “Emergency Stock Holding and Oil Stocks in France”, IEA Seminar on Oil
Stocks and New Challenges in the Oil Market”, Berlin, 9th September 2003.
Iwahara, Tatsuya, “Topics of operational aspects of Japan’s emergency stockpiling”, ‘APEC
Joint oil Stockpiling Workshop’ Seoul, 2nd December 2003.
KNOC, “Korea’s Strategic Oil Stockpiling”, IEA/China Oil Stocks and Emergency Response
Seminar, Beijing, 9-10 December 2002.
KNOC, “Need for Launching Joint Stockpiling to Enhance the Oil Security in the APEC
region”, December 2003.
Kurumada, Naoaki , “Outline of Petroleum Stockpiling and Emergency Response in Japan”,
IEA/China Oil Stocks and Emergency Response Seminar, Beijing, 9-10 December 2002.
Leiby, Paul N. , “Economics of Energy Security Policy – Oil Shocks and Strategic Oil Stocks”,
USAEE Policy Symposium – Energy (in)Security in the 21st Century, MIT, 4th December
2003.
LIU, Xiaoli and ZHANG, Yousheng, “China Petroleum Security and Regional Cooperation”,
‘International conference on Cooperative Measures Enhancing Oil Security in Northeast Asia’,
Seoul, 6th September 2003.
MOCIE, “Korea’s Emergency Response Measures in Perspective: short-term vs. mid & longterm energy security policy and programs”, IEA/ASEAN Workshop, September 2003.
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