Korea's legislation on oil security
This report is part of Oil Security Toolkit
Introduction
There are a variety of acts that govern Korea’s response to an oil emergency. Most importantly, there are the 2017 Petroleum and Petroleum Substitute Fuel Business Act (PAPSA) and the 2016 Energy Act (EA). Together both acts provide the legal framework for Korea’s oil emergency response.
Circumstances triggering operation of the emergency response system
The PAPSA provides for two levels of emergency measures. The first level is triggered when the uninterrupted supply of oil and the satisfaction of Korea’s oil demand is threatened by events in Korea or abroad or when disturbances in the oil market threaten Korea’s public order or national economy (article 21(1) PAPSA).
An aggravated energy emergency exists when the uninterrupted oil supply is threatened in Korea or abroad by war, natural disasters or similar situations and it is deemed impossible to stabilize the situation by means of orders enacted pursuant to article 21 PAPSA and as noted in article 22 (1) PAPSA.
In addition to these two levels of emergencies, the PAPSA also allows for the taking of specific measures at times when oil prices are or are feared to severely fluctuate so as to threaten Korea’s public order and national economy (article 23(1) PAPSA).
Authority determining whether emergency exists
For the purposes of the PAPSA, it is the Minister of Trade, Industry and Energy who determines whether and when the emergency provisions of the PAPSA have been triggered (articles 21(1), 22(1), 23(1) PAPSA).
Legal stockholding obligations
General
According to article 15(1) PAPSA the Minister of Trade, Industry and Energy defines the goal of oil stockholding and develops a plan ensuring Korea’s preparedness for an oil emergency.
Storage Agency
According to article 17 PAPSA petroleum refinery business operators, petroleum export-import operators and persons prescribed by a particular Presidential Decree are obliged to stockpile petroleum in accordance with the provisions of PAPSA. The 1979 Korea Petroleum Corporation Act established the Korean National Oil Corporation (KNOC) which manages and overseas the storage of Korea’s emergency stocks.
Storage Quantity
The plan of the Minister of Trade, Industry and Energy identifies the quantity of oil which is to be stockpiled (article 15(2) 2 PAPSA).
Availability of stocks
Korean primary legislation does not contain any provisions concerning the availability of emergency stocks.
Storage Locations
The plan of the Minister of Trade, Industry and Energy identifies the location and facilities concerning the stockpiling of oil (article 15(2) 3 PAPSA).
Sale of excess stocks
N/A
Mechanisms to address emergency
General
According to article 15(1) PAPSA, the Minister of Trade, Industry and Energy defines the goal of oil stockholding and develops a plan ensuring Korea’s preparedness for an oil emergency. Article 8(1) EA further stipulates that the Minister of Trade, Industry and Energy formulates a contingency energy demand and supply plan in order to ensure Korea’s ability to cope with serious energy demand and supply disruptions.
Stockdraw
Sale/Tender
Article 21 PAPSA, corresponding to the first level of oil emergency, authorises the Minister of Trade, Industry and Energy inter alia to regulate the distribution of oil stocks, the level of stockpiling and the export/import of oil.
Moreover, article 8(3) 3 EA provides that the Minister of Trade, Industry and Energy shall prepare concerning the utilisation of energy reserves at times of emergency.
Production Surge
N/A
Demand restraint
At times of an aggravated oil emergency (article 22 PAPSA), the Korean Minister of Trade, Industry and Energy may, in addition to orders based on article 21 PAPSA, provide inter alia for the rationing of petroleum, restrict the transfer and acquisition of petroleum or restrict or ban the use of petroleum.
Further, article 8(3) EA (cf. 8(4) EA) provides that the Minister of Trade, Industry and Energy shall prepare plans inter alia to allow for the reduction of energy consumption in emergency situations and to allow for the allocation and rationing of oil supply in energy emergencies.
Fuel Switching
N/A
Relaxations of Environmental Standards
At times of an energy emergency, article 21(3) PAPSA, concerning the first level of an energy emergency, authorises the Minister of Trade, Industry and Energy to request the Minister of Environment to relax otherwise existing environmental standards pertaining to oil products contained in the Clean Air Conservation Act.
Regulating sales prices
At times when an oil emergency exists within the meaning of article 23 PAPSA (a situation when severe price fluctuations threaten or are feared to threaten Korea’s public order or national economy), the Minister of Trade, Industry and Energy is entitled to fix the maximum or minimum sales prices of oil.
Monitoring and enforcement of emergency regime
Korea’s emergency regime is monitored and enforced on the domestic and international level. Each will be considered in turn.
Domestic
Reporting duties
Article 5 PAPSA obliges persons intending to run refinery businesses to register with the Minister of Trade, Industry and Energy. The same obligation exists concerning oil export-import businesses (article 9 PAPSA) and petroleum sale businesses (article 10 PAPSA).
Enforcement
According to article 45 (3) PAPSA, violations of measures enacted pursuant to article 22(1) PAPSA may lead to the imposition of fines (up to 100 million won) or imprisonment for up to three years. Violations of measures adopted pursuant to article 21(1) attract fines of up to 50 million won and prison terms of up to two years (article 46 (5) PAPSA).
International
The IEA
As a Member of the International Energy Agency (IEA), Korea is obliged, pursuant to article 2 of the International Energy Programme (IEP), to maintain oil reserves equal to 90 days of net imports of the previous year. IEA Members are obliged to submit information concerning their emergency measures to the IEA secretariat (article 32 IEP) on a continuous basis and the IEA monitors Member countries’ compliance with the IEP.