North Korean Economy Watch

The Nautilus Institute has put together an amazing research paper on the DPRK’s energy sector. I cannot understate the value of the quality/quantity of facts/figures/tables in this research.

You can download the PDF here.

I have also added it to my DPRK Economic statistics Page.

Here is the introduction:

Energy demand and supply in general—and, arguably, demand for and supply of electricity in particular—have played a key role in many high-profile issues involving North Korea, and have played and will play a central role in the resolution of the ongoing confrontation between North Korea and much of the international community over the North’s nuclear weapons program. Energy sector issues will continue to be a key to the resolution of the crisis, as underscored by the formation of a Working Group under the Six-Party Talks that was (and nominally, still is) devoted to the issue of energy and economic assistance to the DPRK.

The purpose of this report is to provide policy-makers and other interested parties with an overview of the demand for and supply of the various forms of energy used in the DPRK in six years during the last two decades:

• 1990, the year before much of the DPRK’s economic and technical support from the Soviet Union was withdrawn;
• 1996, thought by some to be one of the most meager years of the difficult economic 1990s in the DPRK; and 2000, a year that has been perceived by some observers as a period of modest economic “recovery” in the DPRK, as well as a marker of the period before the start, in late 2002, of a period of renewed political conflict between the DPRK, the United States, and it neighbors in Northeast Asia over the DPRK’s nuclear weapons development program; and
• 2005, also a year in which observers have again noted an upward trend in some aspects of the DPRK economy, as well as the most recent year for which any published estimates on the DPRK’s energy sector and economy are available.
• 2008, the last year in which the DPRK received heavy fuel oil from its negotiating partners in the Six-Party talks; and
• 2009, the most recent year for which we have analyzed the DPRK’s energy sector.

Eric T. passes along this amazing satellite photo of the Korean peninsula taken at night on 2012-9-24:

The photo comes from NASA. Click image to see larger version.

When I get some time (maybe this weekend) I will see if I can put names to the lights in North Korea.

Here is the text from the NASA web page:

City lights at night are a fairly reliable indicator of where people live. But this isn’t always the case, and the Korean Peninsula shows why. As of July 2012, South Korea’s population was estimated at roughly 49 million people, and North Korea’s population was estimated at about half that number. But where South Korea is gleaming with city lights, North Korea has hardly any lights at all—just a faint glimmer around Pyongyang.

On September 24, 2012, the Visible Infrared Imaging Radiometer Suite (VIIRS) on the Suomi NPP satellite captured this nighttime view of the Korean Peninsula. This imagery is from the VIIRS “day-night band,” which detects light in a range of wavelengths from green to near-infrared and uses filtering techniques to observe signals such as gas flares, auroras, wildfires, city lights, and reflected moonlight.

The wide-area image shows the Korean Peninsula, parts of China and Japan, the Yellow Sea, and the Sea of Japan. The white inset box encloses an area showing ship lights in the Yellow Sea. Many of the ships form a line, as if assembling along a watery border.

Following the 1953 armistice ending the Korean War, per-capita income in South Korea rose to about 17 times the per-capital income level of North Korea, according to the U.S. Central Intelligence Agency. Worldwide, South Korea ranks 12th in electricity production, and 10th in electricity consumption, per 2011 estimates. North Korea ranks 71st in electricity production, and 73rd in electricity consumption, per 2009 estimates.

Pictured above: (L-Yonhap) Estimated energy consumption in the DPRK; (R) IEA graph of DPRK energy production

Statistics Korea published information on DPRK energy consumption originally published by the International Energy Agency. I have added a link to the IEA’s DPRK data on my DPRK Economic Statistics Page.

The original data is behind a firewall (as best I can tell), so here is coverage of the report in the Daily NK:

Based on International Energy Agency (IEA) documentation, the statistics, which were made public on the 6th via Statistics Korea’s ‘North Korea Statistics Portal’, reveal that per capita electricity consumption in 2008 remained just 819kWh, substantially lower than the 919kWh recorded in 1971.

The figures are just the latest symbolic indicator of the protracted economic decline that began in the 1990s, when the national economy collapsed following the fall of the Soviet Union and the sudden demand that the majority of fuel imports be paid for in hard currency.

Rooted in the provision of low cost fuel by its larger communist neighbors, North Korean electricity consumption had risen steadily until 1991. By 1980 it had reached 1114kWh per capita, a figure that rose again over the next decade to reach 1247kWh by 1990. However, by 1995 it had declined precipitously to 912kWh, and at its nadir in 2000 per capita usage figure was just 712kWh.

This decline was subsequently arrested; however, the following seven years (including 2004 (787kWh), 2005 (817kWh), 2006 (797kWh) and 2007 (762kWh)) reflected how the country was (and remains) unable to recover to the 1990 standard, with population growth outstripping improvements in electricity generation.

In 1971, North Korea had a population of just 14.6 million, but by 2008 this was estimated to have risen to 23.9 million.

Here is coverage in Yonhap.

Read the full story here:
Economic Collapse Reflected in Scarce Electricity
Daily NK
Kim Tae Hong
2012-8-6

By Michael Rank

Independent British energy company Aminex PLC has withdrawn from North Korea, citing ‘”the volatile and unpredictable politics of the area”, just two years after signing a deal covering a 50,000 sq km area off the country’s east coast.

Aminex said it was “in the best interests of shareholders for the Company to withdraw from the Korean exploration programme and not participate in seismic acquisition. This decision will allow Aminex to focus on growing its African portfolio.”

The company first signed an agreement for co-operation in oil and gas with the North Korean government in 2004, but this failed to make progress. In 2010 it introduced a new foreign partner, Singapore-based Chosun Energy Pte Ltd, which provided finance for the initial stages and a regional base in Singapore. Aminex said at the time that “despite challenging international politics,” it had “succeeded in maintaining strong relations with the Korean authorities”, resulting in the production sharing contract signed in May 2010.

But industry sources said Stuard Detmer, who was made Aminex CEO last September, was less enthusiastic about North Korea than his predecessor Brian Hall, who remains executive chairman, and this had contributed to the company’s decision to pull out of the DPRK.

Aminex’s main focus is now on Tanzania, where in February it made the first gas discovery in the onshore Ruvuma basin, having also disposed of an oilfield in Texas.

Aminex said in 2010 that the agreement “involves reprocessing and reinterpretation of old seismic data plus acquisition of new marine seismic data during an initial period. Licence holder] Korex believes that the East Sea has great potential for significant discoveries of oil and gas, while recognising the political challenges in the region and the need to ensure that any international sanctions are strictly observed.”

See previous posts about Aminex here.

Pyongyang, November 18 (KCNA) — The governments of the DPRK and South Sudan established diplomatic ties at an ambassadorial level.

A joint communique on the establishment of bilateral diplomatic relations was made public in Ethiopia on Nov. 16.

The communique was signed by Kim Hyok Chol and Arop Kuol Deng, ambassadors of the DPRK and South Sudan to Ethiopia, upon authorization of the governments of their countries.

The two countries agreed to open their diplomatic ties from the very day of their signature to the joint communique, on the basis of the principle of respect for sovereignty, equality, reciprocity and non-interference and in line with the April 18, 1961, Vienna Convention on Diplomatic Relations.

Since all North Korean embassies must self-finance their operations, it is not likely that they will open an embassy in South Sudan until there are sufficient business contracts to maintain the office overhead. In the meantime, many of their diplomatic and consular functions will probably be held out of the Ethiopian embassy.

What kind of business opportunities await the DPRK in South Sudan? South Sudan is the world’s newest oil-producing nation, so it is likely that the DPRK will try to pursue oil contracts there. As a new nation, South Sudan also has an interest in building up its military capabilities. The DPRK has long supplied military equipment to the African continent, so they will probably look for opportunities in this new nation as well.

To date, the DPRK maintains embassies in the following African countries: Benin, Burundi, Cape Verde, DR Congo, Côte d’Ivoire, Equatorial Guinea, Ethiopia, Ghana, Guinea, Guinea-Bissau, Libya, Madagascar, Mali, Niger, Nigeria, Rwanda, Somalia, South Africa, Tanzania, Uganda, and Zimbabwe.

From the Choson Exchange web page (November 5):

In October 2011, John Kim, a board director of the Choson Exchange, visited the Rajin-Sonbong Special Economic Zone. The following is a summary of some of his findings based on site visits and talks with senior officials in the SEZ. An longer account of his travels and impressions will be available soon. This information helps elaborate on our report from August.

Rajin Port
The Rajin Port employs 1400 workers. The Chinese have conducted feasibility tests regarding two new piers, but currently the port houses three piers with 9-9.5 meters draft. A 30,000 metric ton coal storage warehouse was built at Pier 1 by the Chinese, who moved 80,000 metric tons through the facility in five shipments from January to September. Pier two, largely dedicated to container shipment, is currently dormant and a Swiss company is currently using Pier 3 to ship manganese and talc out of the region. The Russians also have a 49 year lease agreement signed in 2008.

Oongsang [Ungsang] Port
Oongsang Port exported Russian lumber until 1985, but remains largely quiet now except for the occasional fishing boat. The present draft of 7 meters constricts any major future activity, so the North Koreans hope to bring in over $100M to widen the draft to 9 meters. After Rajin Port activity surpasses capacity there, Oongsang Port will become the next regional hub for drybulk activity.

Sonbong Port
Originally opened in the early 70’s, the draft within the port is 7 meters, but a fully laden Very Large Crude Carrier containing 270,000 metric tons of oil can offload at an offshore facility further out at sea. Two pipes, 63 cm in diameter, run for 9km underground before reaching the storage facility at “Victory Petrochemical”, a simple refinery that was designed to refine crude and send oil products (gasoline, naphtha, jet fuel, diesel and fuel oil) back to the port for export. In addition to this two way flow, fuel oil also arrived sporadically at the port as part of aid packages from 1994 to 2008.

Sonbong Power
This power plant was originally designed to take fuel oil from Victory Petrochemical as feedstock and generate power to feed back to Victory. Since the refinery has been offline, Sonbong Power has at times provided electricity to the region, but with fuel oil prices close to $700/metric ton and current electricity prices at 6.5 eurocents/kwh, the economics of running the plant do not work leaving the 800 workers employed here largely idle.

Victory [Sungri] Oil Refinery
Literally translated as “Victory Chemical Plant”, this refinery was completed in 1973 with a 40,000bbl/day crude distillation unit that typically yields 40~50% residual fuel oil for an average crude feed. Investment into upgrading capacity in the international market has led to an eroding of margins for simple refineries like Victory. Currently the refinery is idle and would need over $500M in investment to become competitive.

Hye Song Trading Company
Mr Kim visited a Sewing Factory owned by Hye Song, which runs 8 such factories employing 2000 workers. Output is recorded for the entire year on a bulletin board at the front entrance of the company. All employees except the handyman were women.

Cell Phone use more prevalent
The number of cell phone users in the DPRK crossed 1 million earlier this year and one official commented that the overwhelming majority of urban households have at least one cell phone. This particular official had 4 phones for a household of 3. Foreigners are allowed to use cell phones on a different network, and users of the domestic and foreign network can not call each other. All usage is prepaid.

Handset Type: Local
Purchase Cost: 1570-2200 RMB
Usage Cost: 250 minutes and 20 text messages, while each additional minute is charged at 60 NKW (about .1 RMB/min)

Handset Type: Foreigner
Purchase Cost: 1800-2400 RMB
Usage Cost: Does not include any free minutes and are charged at 2RMB/min

Banking System has room for growth
There are two banks in Rason, the Central Bank, which is focused on domestic transactions, and the Golden Triangle Bank, which is focused on foreign currency transactions. Transactions for goods and services are conducted almost entirely in cash, usually in RMB or NKW. Mechanisms for savings are credit have room for development. As banks take a fee to deposit and withdraw cash, merchants prefer to hold money in cash (usually RMB). Credit is also available almost exclusively through friends or family.

Bottlenecks
A number of issues require solving if Rason is serious about attracting large scale foreign investment. Among these are reliable access to travel visas, reasonable communications costs with the outside world, a more mature banking system with savings and credit mechanisms and favorable tax treatment with a consistent legal framework. The mere fact that Rason is experimenting with market reform is encouraging, and Mr Kim is optimistic about economic development in the region and the nation as a whole.

UPDATE: On a flight today I was able to translate most of this map.  Interestingly, it shows the incomplete Kumho Light Water Reactor (금호원자력발전소: in yellow on the right) but none of the other nuclear facilities.

ORIGINAL POST: A recent visitor to the DPRK took this picture of a map of the North Korean electricity grid:

See larger version here

This is one of the best maps of the North Korean electricity grid that I have seen (abstract as it is). This will be immensely helpful for my own efforts to map the North Korean electricity grid on Google Earth:

Institute for Far Eastern Studies (IFES)
2011-8-24

Kim Jong Il’s visit to Moscow on August 20 is sparking interest for the future of economic cooperation between the two countries.

According to the KCNA, Russian President Dmitry Medvedev expressed interest to increase trilateral cooperation between the ROK-DPRK-Russia in the gas, energy, and railroad sectors. In the message sent from Medvedev to mark the 66th anniversary of independence from Japanese colonial rule, “plans to expand cooperation with the DPRK and the ROK in gas, energy, and railroad industry” were emphasized.

The cooperation projects are evaluated to have “great economic and political significance contributing to the stability in Northeast Asia and denuclearization of the Korean peninsula.”

In July 4, the KCNA reported that the delegates from the Russian energy giant Gazprom headed by Chairman Alekhsandr Ananenkov visited Pyongyang to discuss energy cooperation, although details of the visit was not elaborated. Ananenkov was reported to have met with North Korean officials in gas and oil industriesto discuss bilateral cooperation in these areas.

Russia has also expressed interest in linking gas pipelines to export natural gas to South Korea via inter-Korean railroad system.

A spokesperson of the foreign ministry of the DPRK reported on the recent visit from the vice-foreign minister and chief representative of Russia on Six-Party Talks, Aleksei Borodavkin, this past March. In the statement, the Russian government expressed concerns for improving inter-Korean relations and stressed prospects of the tripartite economic cooperation projects with North and South Korea including the construction of railways, gas pipeline, and a transmission line linking the three countries. The DPRK also expressed support for the upcoming economic cooperation projects.

In result, the main agenda in the bilateral economic cooperation between Russia and North Korea entails railway, gas pipeline, and transmission line construction.

President Lee Myung-bak has met with the Russian president Medvedev in September 2008 in Moscow. At the summit, the two presidents reached an agreement to pursue projects to export Russian PNG or pipeline natural gas to South Korea through a pipeline via North Korea from 2015.

Immediately following the summit, South Korea’s Korea Gas Corporation (KOGAS) and Russia’s Gazprom signed a memorandum of understanding (MOU) to jointly study the possibilities of constructing a long-distance pipeline running from Vladivostok. Under the contract, Russia will send at least 7.5 million tons of natural gas annually for a period of 30 years through a pipeline to South Korea via North Korea.

This joint study between ROK-Russia is expected to serve as a momentum in bringing diverse economic cooperation between North and South Korea as well.

While it is still premature to judge the long-term outlook for such trilateral economic cooperation, its effects are anticipated to contribute to stability and peace in the Northeast Asian region.

Additional Information: here is a summary of the recent Kim Jong-il — Medvedev summit.

Imports from North Korea: Existing Rules,Implications of the KORUS FTA, and the Kaesong Industrial Complex
Mark E. Manyin, Coordinator, Jeanne J. Grimmett, Vivian C. Jones, Dick K. Nanto, Michaela D. Platzer, Dianne E. Rennack
Congressional Research Service (CRS)
June 2, 2011

Download the PDF here.  This publication has been added to the list of previous CRS reports on the DPRK here.

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Trade with China 1995-2009
Nathaniel Aden
Nautilus Institute
June 7, 2011

View the paper here.  A link to this paper has been added to the DPRK Economic Statistics Page. The Nautilus Insitute has also posted links to some very interesting presentations from the 2010 DPRK Energy and Minerals Working Group.

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[Book] The Contemporary North Korean Politics: History, Ideology, and Power System (현대 북한의 정치: 역사, 이념, 권력체계)
Jong Song-Jang (정성장)
More information TBA, but see here and here (Korean).

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[Book] Architekturführer Pjöngjang (German: Pyongyang Architecture Guide)
Philipp Meuser
Order here at Amazon. More here and here.

According to the Korea Herald (h/t L.P.):

A number of economic cooperation projects appear ready to take shape between North Korea and China.

A businessman here claimed the North and China have signed a more concrete agreement last year following up on a 2005 preliminary deal to jointly develop an offshore oil field.

“The North has agreed with China to jointly develop an offshore oil field in the waters off Nampo,” a western coastal town, said Kim Young-il, chief executive of a South Korean trading firm and inter-Korean trade adviser to the Korea International Trade Association.

“The North Korea-China agreement on joint development of the oil field seems to have taken place last year.”

It is estimated that some 20 billion tons of crude oil is buried under the Bohai Gulf continental shelf which stretches across the Korea Bay between the North Pyongan Province and China’s Liaoning Province, Kim said during a policy debate session hosted by a legislator.

“The joint exploration would be economically viable because, once about a third of the oil reserve can be extracted, they can extract between 7 and 8 billion tons, enough to meet China’s entire demand for nearly 30 years,” Kim said.

Read the full story here:
Communist allies seek strategic interests
Korea Herald
Kim So-hyun
2011-6-1