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AsiaElec: South Korea’s oil and gas funding calls green commitments into question

South Korea provided $127bn in support for overseas oil and gas projects between 2011 and 2020 as government-backed development finance institutions (DFIs) continued to back fossil fuels as the government talked up green energy.

A new report from South Korean research and advocacy organisation Solutions for Our Climate (SFOC) found that the $127bn of loans, grants and export insurance was 13 times larger than that provided for coal-fired generation projects abroad in the same period.

Previous research from SFOC in 2019 had found that coal financing totalled just $10bn.

The country’s shipbuilding giants, which are world leaders in the oil and LNG sector, are the biggest beneficiaries of state support.

The issue at stake is that while investors, governments and banks have all stepped up their commitments to renewables, sustainability and ESG, public money is still being used to increase fossil fuel production and CO2 emissions in the shape of oil and gas.

South Korea’s backing of oil and gas projects are a de facto subsidy to fossil fuels and increases transition risk for domestic industries and stranded asset risk for financial institutions, the report found.

The government of South Korea, one of the world’s top three international coal financiers, along with China and Japan, pledged to end overseas coal finance at the US Leaders Summit on Climate in April 2021. 

The South Korean government pledged in October 2020 to aim for a net-zero economy by 2050. The country produced 28.1% of its electricity using coal in 2020, according to data from the Energy Ministry.

“The figures are shocking. South Korea has long been criticised as a ‘climate villain’ for providing massive support to overseas coal power projects, but the country’s newly revealed public finance to overseas oil and gas completely dwarfs its backing of coal,” Sejong Youn, climate finance programme director at SFOC and lead author of the report said.

SFOC found that South Korean public financiers had supported both state-owned enterprises (SOEs) and private sector companies for oil and gas projects abroad in the form of loans and guarantees. 

Dongjae Oh, a researcher at SFOC and co-author of the report, said: “Further investments in oil and gas projects go against the public’s interest by contributing to climate disasters and [are] a direct contradiction to the country’s carbon neutrality drive.” 

“To minimise risk to the Korean economy and public funds, and to demonstrate climate leadership, Korea needs to rapidly stop the pipeline of overseas fossil fuel projects like public institutions in the United Kingdom, Sweden and United States.”

The report broke down the support into $32.2bn (25%) for upstream projects, $49.7bn (39%) for midstream and $45.1 (36%) for downstream projects.

Geographically, the Middle East is the biggest host of projects financed by South Korean public funds ($35.3bn) over the past 10 years, followed by Central Asia ($10.1bn).

The rest of Asia – Southeast Asia, South Asia, and East Asia – is the third largest, with $6.8bn deployed to the region. 

In the upstream sector, Australia is the biggest host of projects with Korean support of $3.6bn, followed by Mozambique with $2.7bn and the United States with $2bn.

One of the most polluting offshore gas projects, the $5.6bn Barossa-Caldita in Australia, is currently under development.

SK E&S, part of the South Korean conglomerate SK Group, holds a 37.5% stake in the project, which arrived at a final investment decision (FID) in March 2021 with KEXIM’s financial support. 

Within the downstream segment, 31% has been committed to oil refining and petrochemical projects, of which 79% was deployed to Middle East and Central Asia.

In terms of the biggest host country, Kuwait ranked first with funds of $7.6bn, followed by Saudi Arabia ($4.3bn) and Uzbekistan ($3.7bn) respectively.

The support for fossil fuels abroad contrasts with stasis at home. South Korea’s Samcheok Blue Power Plant, the country’s last coal-to-power project under development, could hit financial trouble as green activists call on the government to force the project’s financiers to withdraw funding.



The most notable beneficiaries in the industrial sector are major South Korean shipbuilders, including Daewoo Shipbuilding & Marine Engineering, Samsung Heavy Industries and Hyundai Heavy Industries.

Nearly half (46%) of all Korea’s oil and gas public finance, which is about $57.7bn, has been invested in shipbuilding and offshore plant financing.

Of the $57.7bn, $41bn (71%) was provided for transportation vessels, of which LNG carriers received the most, with $23.1bn. As of 2018, Korea’s shipbuilding industry is the world’s largest, with a global market share of 44.2%. 

The findings are particularly troublesome given that oil and gas constitute nearly half of global CO2 emissions, and amid warnings from the International Energy Agency (IEA) calling for no new investments in fossil fuel infrastructure to achieve global carbon neutrality by 2050.

In contrast to South Korea, other state-backed financiers have started to implement restrictions on fossil fuel investments.

The UK government and the European Investment Bank (EIB) announced plans to end public financing for fossil fuels, while the Swedish export credit agencies, Exportkreditnämnden (EKN) and Svensk Exportkredit (SEK), also established a policy to cease all financing for fossil fuel exploration and development by 2022. 

The US Treasury announced a guidance to multilateral development banks on restricting fossil fuel financing.

Except for some downstream and natural gas facilities in developing countries, the US Treasury will oppose coal and oil-based projects and upstream of natural gas projects while restricting the downstream ones.