1. Updated DPRK Energy Balance (Draft) and Work to Be Done Dr. David F. Von Hippel and Dr. Jungmin Kang Nautilus Institute Senior Associates DPRK Energy Expert Study Group Meeting Prepared for the “DPRK Energy Expert Study Group Meeting”, Stanford University, California June 26 - 27, 2006

2. DPRK Energy Experts Study Group 2 Von Hippel/Kang 6/2006 THE DPRK ENERGY SECTOR: OUTLINE OF PRESENTATION Background to Nautilus DPRK Energy Analysis DPRK Energy Balance Update  Overall Approach  Recent Trends in DPRK Economy  Database Updates  Overview of Draft Results: Energy Supply/Demand  Next Steps in Update

3. DPRK Energy Experts Study Group 3 Von Hippel/Kang 6/2006 PREVIOUS AND ONGOING NAUTILUS INSTITUTE DPRK ENERGY WORK 1986-94: Nuclear Weapons/Proliferation Issues 1992-97: UN Energy-Environment Missions 1995: DPRK Energy Supply/Demand and Energy Efficiency Study 1996: KEDO-HFO Supply and Demand Study 1997: Supply and Demand for Electricity in the DPRK--1990, 1996, and Future Paths 1997-02: DPRK Village Energy Project, Study Tours, and Proposal Collaboration 2002: Update to 2000 base year (with KEEI) 2006: Update to 2005 base year (with KEEI)

4. DPRK Energy Experts Study Group 4 Von Hippel/Kang 6/2006 NAUTILUS INSTITUTE DPRK ENERGY ANALYSIS OVERALL APPROACH Obtain as much information as possible about the DPRK economy, energy sector from media sources, literature sources, visitors to the DPRK, trade statistics, market observers, other sources  Information used includes quantitative, anecdotal Use available information, comparative analysis, and judgment to assemble a coherent and consistent picture of the DPRK energy sector  Use physical measures and intensities whenever possible

5. DPRK Energy Experts Study Group 5 Von Hippel/Kang 6/2006 NAUTILUS INSTITUTE DPRK ENERGY ANALYSIS OVERALL APPROACH Think about possible future paths for DPRK energy sector/economy, what changes (national, regional, global) might bring those paths about, implication of changes for end-use, infrastructure  Including consideration of role of DPRK in regional energy economy  Role of ROK in future energy paths, including additional energy sector “connections” on the Korean peninsula Update periodically (including this year)

6. DPRK Energy Experts Study Group 6 Von Hippel/Kang 6/2006 DPRK ENERGY BALANCE UPDATE: OVERALL APPROACH Start with demand/supply estimates prepared for 1990, 1996, 2000 Modification of 1990/96/2000 estimates of demand for fuels to reflect reports of recent changes in conditions in the DPRK Revision of 2000 electricity supply estimates to meet 2005 demand, reflect thermal/hydro capacity/availability changes Estimation of 2005 oil supply reflecting available information (including “official” and "unofficial" trades)

7. DPRK Energy Experts Study Group 7 Von Hippel/Kang 6/2006 DPRK ENERGY BALANCE UPDATE: OVERALL APPROACH Revision of oil products demand to meet the overall supply for major oil products Set level of coal and biomass supply to meet demand  Consistent with information about coal infrastructure, forest productivity Re-adjust supply/demand of other fuels as necessary to produce rough balance Overall, approach: Obtain all information germane to DPRK energy sector  Sift, fit with other data, prepare internally consistent energy balance

8. DPRK Energy Experts Study Group 8 Von Hippel/Kang 6/2006 DPRK ENERGY BALANCE UPDATE: OVERALL APPROACH Information collected from:  Reports by others  Media reports  Official statistics of DPRK trading partners  Information on the DPRK from ROK government agencies  Reports of visitors to and observers of the DPRK  DPRK Energy Experts Study Group

9. DPRK Energy Experts Study Group 9 Von Hippel/Kang 6/2006 DPRK ENERGY BALANCE UPDATE: OVERALL APPROACH Energy Balance Elements--Rows  Domestic resources extraction, imports, exports  Energy “transformation processes”– refining, electricity production, losses…  Energy demand sectors – industrial, residential, transport… Energy Balance Elements– Columns  Fuel/resource categories – in DPRK Energy Analysis work, general and by refined product For each fuel/resource considered, demand and supply must balance  Iterative analysis to balance columns

10. DPRK Energy Experts Study Group 10 Von Hippel/Kang 6/2006 DPRK ENERGY BALANCE UPDATE: DRAFT ENERGY BALANCE TABLE

11. DPRK Energy Experts Study Group 11 Von Hippel/Kang 6/2006 THE DPRK ENERGY SECTOR: RECENT TRENDS (1990s) Decline in the supply of crude oil Continuing degradation of electricity generation, T&D infrastructure Continuing degradation of industrial facilities International trade in magnesite Difficulties with transport of all goods, especially coal Difficulties in coal production related to lack of electricity, mine flooding

12. DPRK Energy Experts Study Group 12 Von Hippel/Kang 6/2006 THE DPRK ENERGY SECTOR: RECENT TRENDS (2000-on) Some economic revival, but mostly associated with foreign aid and/or in areas of the economy that are not energy intensive (markets, restaurants, small agriculture) Cessation of KEDO Heavy Fuel Oil deliveries Supply of electricity to Kaesong from ROK Electricity imports from China (modest) Cross border trade in oil/oil products(?) Construction of small power plants (possibly not connected to main grid)

13. DPRK Energy Experts Study Group 13 Von Hippel/Kang 6/2006 THE DPRK ENERGY SECTOR: DATABASE UPDATES FOR 2005 Database update in early phase, but possible changes include:  Somewhat improved electricity generation and electricity availability in recent years  Modest additions to industrial capacity in recent years (but likely not across the board)  Impacts of recent ROK/PRC infrastructure investments  Changes in official/unofficial fuels imports/exports  Revisit assumptions regarding fuelwood/biomass and coal use in rural residential sector  Modest changes in transport sector  Adjustments to revise fuel use in military sector

14. DPRK Energy Experts Study Group 14 Von Hippel/Kang 6/2006 THE DPRK ENERGY SECTOR: DATABASE UPDATES FOR 2005 Key Questions for Experts Study Group Input: DPRK Energy Supply  Have there been recent significant changes in generating capacity, or change to T&D?  What is total capacity of reported new small power plants, and what is their average capacity factor?  What have been the trends/amounts of fuels imports/exports to/from the PRC, RF?  Have there been recent significant changes in the coal mining sector resulting in changes in coal availability?  What is the status of fuelwood and biomass production?

15. DPRK Energy Experts Study Group 15 Von Hippel/Kang 6/2006 DPRK ENERGY SUPPLY: IMAGES

16. DPRK Energy Experts Study Group 16 Von Hippel/Kang 6/2006 DPRK ENERGY SUPPLY: IMAGES

17. DPRK Energy Experts Study Group 17 Von Hippel/Kang 6/2006 THE DPRK ENERGY SECTOR: DATABASE UPDATES FOR 2005 Key Questions for Experts Study Group Input: DPRK Energy Demand  What do recent economic changes (for example, in the commercial sector) mean for energy use?  Recent trends in rural household and services energy use--fuelwood/biomass, coal, electricity?  Has heavy industry in the DPRK changed significantly in recent years?  What impacts have recent ROK/PRC industrial sector investments had on energy use?  Recent trends in agricultural sector energy use?  Modest changes in transport sector  Have military “exercise tempos” changed recently?

18. DPRK Energy Experts Study Group 18 Von Hippel/Kang 6/2006 DPRK ENERGY DEMAND: IMAGES

19. DPRK Energy Experts Study Group 19 Von Hippel/Kang 6/2006 DPRK ENERGY DEMAND: IMAGES

20. DPRK Energy Experts Study Group 20 Von Hippel/Kang 6/2006 DPRK ENERGY DEMAND: IMAGES

21. DPRK Energy Experts Study Group 21 Von Hippel/Kang 6/2006 DPRK ENERGY DEMAND: IMAGES

22. DPRK Energy Experts Study Group 22 Von Hippel/Kang 6/2006 THE DPRK ENERGY SECTOR: DRAFT RESULTS

23. DPRK Energy Experts Study Group 23 Von Hippel/Kang 6/2006 THE DPRK ENERGY SECTOR: DRAFT RESULTS

24. DPRK Energy Experts Study Group 24 Von Hippel/Kang 6/2006 THE DPRK ENERGY SECTOR: DRAFT RESULTS

25. DPRK Energy Experts Study Group 25 Von Hippel/Kang 6/2006 THE DPRK ENERGY SECTOR: DRAFT RESULTS

26. DPRK Energy Experts Study Group 26 Von Hippel/Kang 6/2006 THE DPRK ENERGY SECTOR: DRAFT RESULTS

27. DPRK Energy Experts Study Group 27 Von Hippel/Kang 6/2006 DPRK ENERGY DATABASE UPDATES: NEXT STEPS Review papers/presentations prepared for this Meeting and other information gleaned from Participants Continue review of available DPRK literature Interview additional recent visitors to the DPRK Revise/rebalance analysis of 2005 Energy Supply/Demand Obtain reviews of draft database/Report, and revise as appropriate Prepare Final Report Use Report results, other materials/ideas collected to work with others to identify and elaborate possible sets of activities to assist DPRK energy sector redevelopment

28. DPRK Energy Experts Study Group 28 Von Hippel/Kang 6/2006 ROK DATA ON DPRK ENERGY AND COMBINED KOREAN MODEL Reviewing ROK literature on DPRK energy sector and economy  Available data in Korean  Trace down ultimate sources of figures in ROK literature to the extent possible Use DPRK database to develop model of future energy supply/demand in the DPRK (using the LEAP energy/ environment software tool) In a parallel effort, develop and update ROK database in LEAP Use DPRK, ROK LEAP datasets to develop coordinated energy paths for Korea as a whole  Including paths in which energy resource links are made with other countries in Northeast Asia

29. DPRK Energy Experts Study Group 29 Von Hippel/Kang 6/2006 THANK YOU!