By Vijay Jayaraj and Ananya Bhatia

South Korea has long been a radiant mosaic of industrial might, technological innovation, and global ambition. Yet, beneath the gleaming skyline of Seoul and the industrious hum of Ulsan’s refineries lies a delicate but indispensable thread: Energy.

As South Korea faces mounting pressure to bridge its energy supply-demand gap, the nation has taken a bold step—doubling down on coal, oil, and natural gas imports. This decision, controversial in an era dominated by calls for decarbonization, underscores South Korea’s pragmatic focus on safeguarding its economic engine while reinforcing its industrial dominance.

Hub of Growing Economy

South Korea’s industrial sector is the lifeblood of its economy. From automotive giants like Hyundai and Kia to semiconductor leaders such as Samsung and SK Hynix, the nation’s global reputation is forged in the heat of factories and the precision of cutting-edge production lines.

Regions like Gyeonggi-do—a hub for industry that ranges from heavy industry (chemical, steel, electronics, machinery) to textile industry, IT, farming, livestock and fisheries—and Ulsan, known as the nation’s petrochemical capital, have experienced a surge in energy-intensive activities, from chip fabrication to shipbuilding, each demanding a stable and cost-effective power supply.

While traditional industrial hubs like Ulsan and Gwangju continue to thrive, the government’s energy strategy is also nurturing the growth of emerging centers. Saemangeum is particularly noteworthy, with the administration committing $3 billion to transform the area into a cutting-edge manufacturing zone. Already, companies specializing in battery production, and robotics have begun operations, requiring substantial energy inputs in their initial phases.

However, powering this economic machinery requires energy in massive quantities—energy that South Korea largely imports due to its resource-scarce geography. The disparity between ambition and capacity became glaring during the summer of 2023, when electricity reserves dwindled precariously. Industrial stakeholders, fearing production halts, pressed the government for a more reliable solution.

No For Time Lukewarmness: Energy Reality Beckons Full-Fledged Approach

For Seoul, one way to address this is by securing energy resources for the year ahead. Around 80% of the country’s primary energy comes from fossil fuels. Oil dominates the sector, followed by liquified natural gas (LNG), and coal. The country’s electricity generation mix has not changed much since the year 2000, where fossil fuels continue to dominate.

Nuclear is the third highest contributor to electricity and represents the single largest share of domestic energy production. This means that the majority of the country’s energy requirement is met through import of fossil fuels. A new study by data and analytics company Wood Mackenzie shows LNG and oil will continue to play a strong role in the South Korean economy until 2050.

Given the challenges of keeping energy prices down and meeting the ever-changing fossil fuel import market, South Korea is not meddling with its domestic energy security.

The government has now prolonged consumption tax cuts on LNG and coal for electricity generation by six months, extending the relief through June. Complementing this, import tariffs on LNG will remain at zero, with the current tariff suspension extended for an additional three months until the end of March. These targeted interventions aim to stabilize the energy sector’s financial landscape and support critical infrastructure resilience. It has also allowed a freeze in electricity prices for households which would otherwise have seen a rise in this October.

With current Qatar and Oman LNG contracts covering 8.98 million tons set to expire, Korea Gas Corp. (KOGAS) is pursuing a dynamic procurement strategy: securing approximately 4 million tons through flexible, mid-term contracts ranging from three to fifteen years, with a keen eye on potential long-term U.S. LNG acquisitions.

Qatar is Korea’s No. 2 liquefied natural gas (LNG) supplier, accounting for 19.5 percent of Seoul’s total LNG imports. In November, ministers from Qatar held discussions at Seoul and according to the Industrial ministry of Korea, the two countries agreed to “maintain strong cooperation on energy supplies” and even foray into shipbuilding projects.

In July 2024, South Korea inked a $1.5 billion contract with UAE‘s Abu Dhabi National Oil Company (ADNOC), where the latter will assist Samsung Heavy Industries and Hanwha Ocean to build 8 to 10 LNG carriers. The two countries have also removed tariffs on more than 90% of all imports between them over the next decade.

Like KOGAS, Korea National Oil Corp. (KNOC) is expanding its strategic reserves by approximately 3 million barrels of crude oil and petroleum products. This calculated move aims to create a robust buffer against potential supply chain disruptions. As a part of the plan, KNOC will secure a strategic petroleum reserve through a landmark agreement with Kuwait Petroleum Corporation, where 4 million barrels of Kuwait Crude will be stored at KNOC’s Ulsan facility by the end of 2024.

South Korea continues to seek increase in LNG imports from Japan, China, and Australia, and crude oil imports from the Middle East. Even coal, often painted as the villain of climate policy, has seen imports from Indonesia and Australia rise steadily since 2021.

These developments highlight South Korea’s dual approach: sustaining legacy industries while incubating next-generation manufacturing hubs. By addressing the immediate energy demands of both, the nation is solidifying its position in global supply chains.

This approach may not align with the idealistic visions of a carbon-free future, but it reflects a fundamental truth: industrial powerhouses like South Korea cannot afford to gamble with energy security. The choices made today will define the nation’s ability to innovate, compete, and thrive in the decades to come.

For South Korea, the flame of industry burns bright—and it will take all the energy the nation can muster to keep it alive. As always, coal, LNG, and nuclear will continue to propel the next generation of Koreans to economic supremacy.

This commentary was first published at EKN Korea on January 6, 2025.

Vijay Jayaraj is a Science and Research Associate at the CO₂ Coalition, Arlington, Virginia. He holds an M.S. in environmental sciences from the University of East Anglia and a postgraduate degree in energy management from Robert Gordon University, both in the U.K., and a bachelor’s in engineering from Anna University, India.

Ananya Bhatia is an urban development consultant based in Ho Chi Minh City and has coauthored papers on disaster resilience in Asia. She holds a master of technology degree.