1. Update On The ROK Energy Sector and The ROK LEAP Model May 13, 2005

2. I. I.Update on the ROK Energy Sector II. II.The ROK LEAP Model

3. Major Energy & Economic Indicatior Indicator19811990199520022004 Avg. Annual Growth Rate (%) ‘81-‘90‘90-‘04‘81-‘04 Primary Energy Consumption (million toe) 45.793.2150.4208.6220.88.26.47.1 Per Capita Energy Consumption (toe) 1.182.173.344.384.587.05.56.1 Energy/GDP (toe/1,000 USD) 0.290.270.31 0.28-0.80.3-0.2 CO 2 Emissions (million t-CO 2 ) 135.9239.0366.9466.2-6.5 (‘90-‘02) 5.7 (‘81-‘02) 5.8 CO 2 Emissions Per Capita (t-CO 2 ) 3.515.578.149.79-5.3 (‘90-‘02) 4.8 (‘81-‘02) 4.8 GDP (trillion won)122.4263.4377.4524.7566.28.95.66.9 Population (million)38.742.945.147.648.21.10.840.96 Note: GDP is constant value of 1995.

4. Consumption Shares by Source(2004)

5. Trend of Primary Energy Consumption by Source   Trend in Consumption Shares (1981  1990  2004, %) Oil  : 58.1  53.8  45.6 Coal  : 33.3  26.2  24.1 LNG  : 0  3.2  12.9 Nuclear  : 1.6  14.2  14.8   Trend in Consumption Shares (1981  1990  2004, %) Oil  : 58.1  53.8  45.6 Coal  : 33.3  26.2  24.1 LNG  : 0  3.2  12.9 Nuclear  : 1.6  14.2  14.8

6. Final Energy Consumption by Sector   Trend in Consumption Shares (1981  1990  2004, %) Industrial  : 44.9  48.1  55.8 Rsd. & Cmrcl  : 40.7  29.3  21.4 Transport  : 9.6  18.9  20.7 Public & Other  : 4.8  3.7  2.1   Trend in Consumption Shares (1981  1990  2004, %) Industrial  : 44.9  48.1  55.8 Rsd. & Cmrcl  : 40.7  29.3  21.4 Transport  : 9.6  18.9  20.7 Public & Other  : 4.8  3.7  2.1

7. Overseas Energy Dependency   Major Feature(2004) Import Dependency: 96.6% ME Dependency: Oil 78.1%, Gas 48.5% Energy Imports: $ 49.6 billion Energy Import/Total Import: 22.1%   Major Feature(2004) Import Dependency: 96.6% ME Dependency: Oil 78.1%, Gas 48.5% Energy Imports: $ 49.6 billion Energy Import/Total Import: 22.1% 500

8. District Heating Heat (Tcal) Electricity (Gwh) Total (Tcal) Household & Building 16,2684,62620,246 (25.4%) Industry47,13414,43859,551 (74.6%) Total 63,402 (79.5%) 19,054 (20.5%) 79,797 Shares in National’s Total Energy -5.5%3.2% Energy Production in DT(2003)

9. District Heating Heat Production by Facilities(2003)

10. Fuels for Production of District Heating CoalLNG By- Product gas B-CLSWROthers Total (th.toe) Household& Building -73.5%-6.8%18.9%0.8%1,814 Industry25.9%1.3%29.4%24.9%18.4%0.1%5,202 District Heat19.2%20.0%21.8%20.3%18.5%0.3%7,016 Shares of Fuel by Sources(2003)

11. Projection of Energy Demand(BAU)   Consumption Shares by Sector (%) : 2001  2020 Industrial  : 55.0  50.8 Residential  : 15.7  15.0 Transport  : 21.0  24.6 Commercial  : 6.3  7.5   Consumption Shares by Sector (%) : 2001  2020 Industrial  : 55.0  50.8 Residential  : 15.7  15.0 Transport  : 21.0  24.6 Commercial  : 6.3  7.5 311.8 mtoe ☞ Forecasted by KEEI

12. Target for Energy Intensity 2003200720122020 Target0.3030.2770.2480.198 BAU0.303-0.330 (2011) 0.270  Ambitious target for energy intensity set by Korean government in Dec. 2004 government in Dec. 2004 - 88 action plans established to attain the target - 88 action plans established to attain the target Energy / GDP( toe/million Won)

13.   Basic concept - leasing the excess oil storage capacity to foreign oil companies or oil-producing countries.   benefits for Korea - raising economic efficiency in storage through collection of leasing fee - strengthening emergency preparedness. ( Korea has the priority right to purchase the oil stocks stored in the leased facility in case of an emergency.   For lessee - securing sales-push point in the center of big consuming region (Korea, Japan, and China), - enhancing marketing to customers where VLCC(very large crude oil carrier) is unacceptable. - Currently, KNOC is conducting the joint oil stockpiling with Norway's Statoil (11.3 million barrels) and China's Sinochem. International Jointing Stockpiling

14. Strategic(Emergency) Oil Stocks GovernmentRefinery Co.Total Crude Oil54.627.381.9 Oil Product10.647.851.4 Total65.268.1133.9 Duration53.7days55.2days108.3 days Oil Stocks (As of Dec., 2004) (Unit:mbbl) - Duration days are on the basis of previous imports - - Currently, Korean government has 99.1 million barrels of oil storage capacity in 8 storage bases and plans to increase the storage capacity up to 146 million barrels by 2007.

15. Government Goal for Renewable energy 2003 2006 2011 supplyShare(%)supplyShare(%)supplyShare(%) Solar thermal 41.40.93101.51.45318.12.39 Bio-energy 197.04.43495.07.071,050.07.87 Waste-energy 3,080.069.205,050.072.137,540.056.54 PV 2.70.0621.90.31341.22.56 Wind Power 13.10.29125.91.801,311.49.83 Small Hydropower 50.01.12111.01.59446.03.34 Fuel Cell --0.40.01147.11.10 Geo thermal 0.80.0212.10.17160.81.21 Ocean energy --0.70.01431.53.24 Hydrogen ---1.30.01 Coal ---374.62.81 Sub-Total 3,38576.055,91984.5412,12290.90 Hydro power 1,06623.951,08215.451,2139.10 Total 4,451100.007,00110013,335100 Share of TPEC2.06%3.0%5.0%(BAU 2.6%) Electricity from renewable energy (Gwh)5,1347,835.625,354 Renewable energy share in generation1.8%2.4%7.0%

16. The ROK LEAP Model

17. BAU Path   Assumptions of BAU Path - Base Year: 2001 - Timeline: 2001 – 2030 Item2001201020202030Annual Increase (%) ’01-’10’10-’20’20-’30 GDP (1995 T KRW) 493.4768.41,165.01,629.15.04.33.4 Population (Million) 47.349.650.750.30.50.2-0.1 Households (Million) 14.916.918.219.11.51.00.5 Person per Household 3.22.92.82.6-0.5

18. Demand in BAU Path   Residential - Cooking

19. Demand in BAU Path   Residential - Space Heating

20. Demand in BAU Path   Residential - Appliances

21. Demand in BAU Path   Industrial

22. Demand in BAU Path   Transportation

23. Demand in BAU Path   Transportation - Household Vehicles

24. Demand in BAU Path   Transportation - Mass Transit & Freight

25. Final Energy Demand in BAU Path

26. Imports of Primary Energy in BAU Path

27. National Alternative Path   Assumptions of National Alternative Path - Most assumptions of National Alternative Path are the same to those for BAU Path, except electricity generation projections. - Emphasizing renewable energy: Share of electricity generation by renewable is assumed to be 7.0% over total electricity generation in 2011, comparing with 2.6% that is in the national plan. - Decreasing new deployment of nuclear power plants after 2015: Strong resistance against new deployment of nuclear power plants by local communities has been and is anticipated.

28. National Alternative Path   Electricity capacity and generation for BAU Path