An LNG carrier docks at a terminal in Tongyeong, South Gyeongsang, operated by Korea Gas Corporation. [KOREA GAS CORPORATION]
[NEWS ANALYSIS]
The blockade of the Strait of Hormuz has laid bare Korea’s acute vulnerability in energy security — arguably the most exposed among major Asian economies.
While Korea scrambled to secure crude oil and LNG supplies, neighboring Japan — whose energy self-development rate is more than four times higher — was likely far less rattled. China, meanwhile, is in an entirely different league as a major energy producer itself.
Despite facing similar resource constraints as Korea, Japan has built greater resilience through aggressive overseas equity investments and diversified procurement channels, allowing it to maintain relatively stable energy supplies during the latest crisis.
Energy experts warn that Korea remains dangerously fragile in terms of strategic energy security, and as the rivalry between the United States and China intensifies, strengthening the nation’s energy self-sufficiency is no longer optional but essential.
Korea lags in Asia
Korea’s energy self-development rate — the share of oil and gas secured through domestic companies’ overseas and local production relative to total imports — stood at just 10.8 percent in 2024, according to data from the Ministry of Trade, Industry and Resources.
This was down from 15.5 percent in 2015.
By contrast, Japan raised the ratio from 27.2 percent to 42.1 percent over the same period. Tokyo aims to push the figure to 60 percent by 2040, according to data from Japan’s Ministry of Economy, Trade and Industry.
Both Korea and Japan are manufacturing powerhouses in sectors such as automobiles, semiconductors and petrochemicals, yet remain overwhelmingly dependent on imports for the oil, natural gas and critical minerals needed to sustain those industries. To hedge against supply risks, they pursue equity-based resource development by investing in large-scale overseas energy projects operated by global oil majors such as ExxonMobil and Shell, or by partnering directly with host governments to secure production stakes.
Japan has been particularly aggressive in expanding its LNG self-development capacity, with Australia accounting for roughly 40 percent of its natural gas imports. Much of that supply comes from projects they have stakes in, including the Ichthys LNG Project.
Although Japan joined Western sanctions against Russia, it has continued importing LNG from the Sakhalin-2 project, in which Japanese firms have held equity stakes since the early stages of development. Sakhalin-2 accounts for roughly 10 percent of Japan’s LNG imports.
Australia is also central to Korea’s overseas energy investment strategy, where Korea Gas Corp. holds a 15 percent stake in the GLNG Project, a massive liquefied natural gas development from which Korea has imported roughly 3.5 million tons of LNG annually under a 20-year supply agreement that began in 2016.
In the case of crude oil, Japan’s dependence on the Middle East stands at about 95 percent, even higher than Korea’s 70 percent. Yet Japan has secured key equity stakes in offshore oil fields in Abu Dhabi, allowing it to produce and procure substantial volumes directly from the region.
“Japan’s primary exposure to Middle Eastern fossil fuels may be greater, but when measured across resilience indicators such as self-development rates, refining autonomy, strategic reserves and alliance-based resource networks, Korea remains the most vulnerable among major East Asian economies,” said Cho Hong-chong, an economics professor at Dankook University.
Japan surpassed its 2030 target for oil and natural gas self-development — reaching 40.6 percent in 2020 against a goal of 40 percent — and raised its target to above 50 percent. Japan is also the only Group of 7 country that provides large-scale public financing for overseas resource development projects, with much of the support funneled through the Japan Organization for Metals and Energy Security, or Jogmec.
China, meanwhile, as an energy-producing nation, has oil accounting for just 18 percent of its total energy mix as of 2024, while roughly 27.5 percent of its oil supply comes from domestic production.
Vietnam's Block 15-1/05 offshore project, in which SK Earthon holds a 25 percent stake. [SK EARTHON]
Political roots behind the failure
The widening gap can be traced to a decisive inflection point around 2013, when Korea’s political establishment began to view overseas resource development as a “vested interest” or a form of corruption.
Under the former Lee Myung-bak administration, the country pursued an ambitious overseas resource strategy, investing roughly 36 trillion won ($24 billion) through state-owned enterprises — including the Korea National Oil Corporation, Korea Gas Corp., and Korea Resources Corporation — to raise self-development rates to 30 percent within a decade.
However, the projects incurred significant losses amid short-term performance pressures, limited technical expertise and acquisitions made at market peaks.
“The following Park Geun-hye administration reframed the initiative not merely as a failure but as a symbol of entrenched corruption, leading to fire-sale divestments and a complete withdrawal of budgetary support,” Cho added.
“Over time, the three state-run resource companies absorbed losses of about 13.9 trillion won, while private-sector participation also contracted sharply.”
Japan, however, moved in the opposite direction. Following the 1973 oil shock, Tokyo established Jogmec and systematically cultivated private players such as Inpex and Japex.
The policy framework has remained largely intact for five decades, supported by roughly 100 billion yen ($630 million) in annual funding for resource development. During that time, Korea’s budget fell to roughly 30 billion won, a 25- to 30-fold gap that has compounded over time.
The number of new overseas resource development projects, which peaked at 107 in 2008, fell to 10 by 2015, to just three by 2017 and ultimately to only two by 2023, according to the Industry Ministry.
LNG produced at Australia’s Barossa gas field by SK Innovation E&S arrives in Korea in February, marking the first case in which a domestic private company has independently managed the full upstream value chain to bring LNG into the country. [SK INNOVATION E&S]
State backing, multilayered plans
As resource development is a long-horizon, high-risk industry, Korea would require exceptionally robust state support even at this stage to catch up, experts say.
They argue that a bipartisan political consensus — potentially in the form of a cross-party resolution or special legislation — is needed to resume direct investment by state-owned enterprises.
Given the limited time to replicate Japan’s full-scale exploration-led model, a more pragmatic dual strategy is needed, such as acquiring equity stakes in oil and gas fields to rapidly lift self-development rates, alongside traditional upstream exploration.
“Overseas resource development, supply chain diversification, and the upgrading of strategic reserves are all necessary, but in the end, the pace comes down to cost,” said Kim Tae-hwan, a senior researcher at the Korea Energy Economics Institute (KEEI)’s oil policy division.
“To accelerate supply expansion, a commensurately larger infusion of capital is required, and the relationship is by no means linear,” Kim added. “How fast or how gradually this transition should proceed ultimately hinges on social compromise and the search for an appropriate balance.”
Analysts also caution against repeating past mistakes by avoiding excessive concentration of supply chains in a single country or region.
“Efforts to reduce dependence on the Middle East by shifting imports toward the United States or other specific regions could simply transfer exposure from one set of risks to another — from geopolitical shocks to natural disasters such as hurricanes in the Gulf of Mexico, or operational accidents,” said Kim Tae-heon, senior researcher at KEEI.
“A more sophisticated ‘multilayered portfolio’ approach that allocates supply sources according to distinct risk profiles — balancing geopolitical volatility, natural disasters and industrial or operational risks in a complementary structure."
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