NORTH KOREA: ENERGY SCENE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88T00539R000500760002-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 24
• Document Creation Date: December 22, 2016
• Document Release Date: December 20, 2011
• Sequence Number: 2
• Publication Date: July 1, 1987
• Content Type: REPORT

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Directorate of
Intelligence
North Korea: Energy Scene
A Research Paper
EA 87-10028
July 1987
copy 2 3 0
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Directorate of
Intelligence
North Korea: Energy Scene
A Research Paper
This paper was prepared b Office of
East Asian Analysis. Comments and queries are
welcome and may be addressed to the Chief,
Northeast Asia Division, OEA
Secret
EA 87-10028C
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North Korea: Energy Scene
Summary North Korea's energy picture offers a striking contrast between abundant
..n w -I... 1X01
was used in this report. shortfalls that have created bottlenecks throughout the economy and have
even affected the all-important military sector. P'yongyang has tried short-
term fixes to deal with energy-related difficulties, but for the most part
these have either exacerbated existing problems or created new ones:
? P'yongyang has exhorted energy producers to increase output, but such
orders have strained equipment and reduced time for maintenance and
repair.
? The North has tried alternative fuels, but use of lower octane gasoline or
methane in motor vehicle engines, for example, reduces efficiency and
can cause damage.
North Korea's efforts to go beyond these stopgap measures focus on
expanding electric power capacity and coal-mining operations, as well as
increasing oil imports and domestic exploration. In our view, the goals
P'yongyang has set are overly ambitious and unlikely to be met, given the
North's shortages of manpower, machinery, and materials; its inability to
pay for imports of equipment; and its inadequate infrastructure:
? During the current Seven-Year Plan (1987-93) P'yongyang wants to
double coal output, but we doubt it can increase production much faster
than the 7.5-percent annual rate achieved in recent years.
? Even if the North completes the electric power plants under construction,
it will be 7 to 8 million kilowatts short of the capacity needed to meet its
goal of tripling output by 1993.
? P'yongyang is already behind on payments to its three major oil
suppliers, who are unlikely to extend new credits the North would need to
step up imports, and domestic exploration has met with little success.
As a result, energy shortages will continue to hinder the North Korean
economy. Only a change in priorities could boost the energy sector.
P'yongyang would have to divert substantial investment from new produc-
tion facilities in areas such as steel and machinery to even come close to re-
alizing its energy goals. A less centralized leadership that relied on expert
advice in planning could also give the energy sector a nudge. But wide-
ranging reforms in decisionmaking and incentives that would enable the
energy sector, as well as the rest of the economy, to take off are unlikely to
occur soon, in our judgment.
Secret
EA
July 1987
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Contents
Summary
The North Korean Energy Picture: Potential and Reality
Longer Term Solutions
Electric Power 6
Petroleum 8
Details on Energy Availability
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North Korea: Energy Scene
The North Korean Energy Picture:
Potential and Reality
By most measures, North Korea should not have
faced the energy shortages that have crippled its
economy. The North has ample reserves of coal and
sources of waterpower. Its relatively small population
and low stage and pace of industrialization should
have kept demand at manageable levels, especially
compared with South Korea, which has nearly twice
as many people and a booming economy to support,
but fewer domestic energy resources. North Korea
also derives substantial benefits from its ties to the
USSR and China, which have provided much of the
equipment and technology for its power plants and oil
refineries and most of its oil. Moscow, in fact, donated
equipment immediately after the Korean war, and
both the USSR and China later sold North Korea
equipment on credit. In addition, Beijing and, until
recently, Moscow have granted large price subsidies
on their exports of oil to the North.
Despite what would appear to be a satisfactory energy
base, North Korea is unable to meet even the modest
demands of its primary energy user, the industrial
' North Korea allocates nearly all of its energy to the productive
sector-where the high share of heavy industry results in high
energy use-with very little going to other consumers. In contrast,
the South allocates about one-third of its energy for residential and
Preview of North Korea's Energy Sources
North Korea's fuel and power industries are based
mainly on its large resources of coal and water power,
with coal estimated to account for more than 70
percent of the energy available from primary sources,
hydroelectric power for about 20 percent, oil for
about 5 to 6 percent, andfuelwood for the remainder:
? Coal. North Korea's major deposits of coal-we
estimate reserves at 8 to 12 billion metric tons-are
anthracite and are used mostly for electric power
generation. All high-quality coking coal for the
metallurgical industry must be imported.
? Electric power. The electric power industry, equally
divided between hydropower and coal, had an in-
stalled capacity of about 6.5 million kilowatts at
the end of 1986. Pyongyang has relied heavily on 25X1
imports, largely from the Soviet Union, for equip-
ment for its power plants.
? Petroleum. North Korea depends on imports to
supply its two oil refineries, one built by the Soviets
in the early 1970s and the other by the Chinese
later in the decade. Imports from China have
remained steadier over time than have those from
the USSR and Iran, the North's other two major
suppliers.
See appendix for further details on the North's
energy sources.
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In our view, North Korea's inability to meet its energy
needs is rooted in systemic and technical problems
that afflict the economy as a whole.
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Like other parts of the economy, the energy sector is
constrained by technical limitations. The coal indus-
try's inability to fully exploit the North's abundant
reserves illustrates this problem. North Korea's coal-
mining technology remains far below international
standards. For example, the North lacks the know-
how, as well as the machinery and managerial skills,
for rapid exploitation of deeper seams as the easier
deposits are worked out. Coal mines are also constant-
ly short of pit props, explosives, detonators, oil, and
spare parts. The lack of railway spurs and loading
facilities, roads, living quarters, and medical facilities
has delayed the opening of new minesites. Similar
problems have impeded the exploitation of the
North's hydroelectric power potential.
The oil industry has similar infrastructure problems,
as well as the financial limitations that trouble all
parts of the energy industry. North Korea cannot
afford to import all the oil it needs to keep its
refineries operating. And the North has not yet begun
to make large-scale use of nuclear power, for which it
must rely completely on foreign equipment.
Short-Term Solutions
P'yongyang clearly recognizes the difficulties con-
fronting the energy sector, but in many cases its quick
fixes only exacerbate those problems or create others:
? P'yongyang also has consistently called on energy
? Another short-term fix has been to use alternate
fuels. But using lower octane gasoline or methane in
motor vehicle engines reduces efficiency and could
damage them.
? P'yongyang has called for reduction in energy use.
Cutbacks, however, have led to frequent black-
outs-which are costly because workers are idle and
equipment must be shut down-and to power
brownouts, which can seriously damage equipment.
Longer Term Solutions
North Korea has gone beyond these stopgap measures
to identify long-range objectives for solving energy
problems. In fact, energy figures prominently among
10 goals for economic development the North origi-
nally selected for completion in the 1980s but now has
pushed into the early 1990s. According to the North
Korean press, the Third Seven-Year Plan (1987-93)
calls for expanded electric power capacity and en-
larged and modernized coal-mining operations. It also
has placed a priority on exploring for both offshore
and onshore oil reserves, and on increasing oil im-
ports. Many of the projects would require at least
some imported equipment and technology, placing
pressure on North Korea to boost exports to fund such
purchases as well as additional oil imports.
Coal. In our judgment, all of the North's goals for the
energy sector are ambitious. There is some chance of
success in the area of hard and bituminous coal
production
The North already has stressed the importance of
progress in this area. An editorial in the Korean
Workers Party daily, Nodong Sinmum, last Septem-
ber, for example, dealt at length with the need to
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boost coal output, citing Kim 11-song's teaching that
"coal is the food for our country's chuche (self-reliant)
industry." P'yongyang also has announced plans to
improve mine safety, particularly in providing protec-
tion from flooding. Damage to mines in the wake of
Typhoon Vera last summer highlighted the need for
such steps. Moreover, North Korea has succeeded in
lining up foreign help for the industry. According to
the Polish press, Warsaw has agreed to provide
equipment and technical help for a coal mine in the
Anju area; and the North is probably counting on
Japan and the USSR as continued sources of equip-
ment.
We do not know if P'yongyang will match its planning
with action in the form of funding or resources. If it
does give more attention to the coal industry, the
North should be able at least to equal the 7.5-percent
average annual growth rate in hard coal output
realized during the last Seven-Year Plan, which cov-
ered 1978-84. But we doubt it can meet the new plan
target of 10.5-percent growth in production per year.
We expect that continued shortages of manpower,
materials, and machinery will prevent significant
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Figure 1. North Korea: The
T'aech'on hydroelectric project
progress. Moreover, foreign exchange problems will
limit the amount of equipment North Korea can
import.
Electric Power. The North's plans for electric power
are even more ambitious than those for the coal
industry. P'yongyang hopes to triple electric power
output to 100 billion kilowatt-hours by 1993. The
North Korean press has headlined construction at two
major hydroelectric power projects, and P'yongyang
claims it has released thousands of soldiers to work at
the sites:
? Construction on the T'aech'on hydroelectric power
project in the northwestern part of the country
began in 1981 (see figure 1). According to the North
Korean press, the project will consist of five separate
power stations, two of which are nearing comple-
tion. The North Korean press also reports that the
project will use 125,000-kilowatt generators, which
the North has recently begun to produce at the
Taean Heavy Machinery Complex (see figure 2).
? Last year the North broke ground for construction
of the Kumgangsan hydropower project in the
southeast. P'yongyang says the plant, which will be
the largest in the country, will have a capacity of
810,000 kilowatts. P'yongyang plans to create four
reservoirs-at Imnam, Chongok, Changan, and
Naepyong-that will provide water to power the
plant, 20 kilometers south of Wonsan near Sinhwa
RiJ
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The North has commitments for foreign assistance in
expanding its electric power base:
China will
assist in construction of the Kumgangsan project. In
addition, the council of the China-Korea Hydraulic
Corporation-which operates joint hydroelectric
projects between the two countries-adopted a pro-
posal last July for joint construction of a new power
plant on the Yalu River.
? Since early 1984, North Korea has conducted nego-
tiations with Poland, Switzerland, and Austria for
construction of a thermal power station at An u to
consist of four 250,000-kilowatt unitsF
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Figure 2. North Korea: A
125,000-kilowatt generator be-
ing built at the Taean Heavy
the USSR has agreed to help
build a 200,000-kilowatt thermal power plant in
east P'yongyang.
In December 1985, the Soviets also agreed to help the
North build its first nuclear power plant, which
reportedly will have a capacity of about 1.4 million
kilowatts. In a February 1986 interview with the US
publication Nucleonics Week, the chairman of the
USSR State Committee for the Utilization of Atomic
Energy stated that Soviet-designed VVER-440 reac-
tors would be built in North Korea. The project would
be a boon to the North because it would allow for
diversification of energy sources and provide relatively
stable supplies. The project appeared to be in trouble
in the spring of 1986, however, following the Cherno-
byl' accident.
Nevertheless, we believe the Soviets could drag their
feet in getting the project off the ground. Moscow was
apparently reluctant to provide P'yongyang a nuclear
reactor in the first place: negotiations for Soviet
nuclear power reactors were reported as long ago as
1978.
Although construction or planning of new power
plants is already under way and the North has
promises of foreign assistance, we believe P'yongyang
will fall far short of its goals for the electric power
industry under the new Seven-Year Plan. The nuclear
power plant may not be completed until well after the 25X1
plan ends in 1993. Given its troubles in the coal 25X1
industry, P'yongyang probably will not have enough
coal to fuel the thermal electric power plants it is
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constructing. Even if all the power plants that we
know are under construction were completed and
operating, the North would still be 7 to 8 million
kilowatts short of the capacity we believe necessary to
meet its production goal. In sum, P'yongyang may be
able to increase electric power production 8 to 10
percent a year, faster than the 5-percent rate achieved
since 1975, but we believe it will remain below the 16-
percent annual rate implicit in the Seven-Year Plan
and well below the needs of the economy.
Petroleum. The North is least likely to make substan-
tial progress toward solving its energy problems in the
petroleum sector. P'yongyang is in arrears on its debts
to all three of its major suppliers-and none is likely
to extend new credit:
? The USSR agreed in early 1986 to supply the North
with 20,000 b/d of crude oil for its east coast
refinery
The volume is about the same as that stipulated in
North Korean-Soviet trade protocols of the past
several years, but Soviet trade data indicate actual
deliveries in 1981-85 did not reach that total (see
table 1). Moreover, in view of the North's poor
record for increasing exports to cover oil and other
imports, the requirement for advance payment
clearly limits the agreement.
? The Chinese probably also will continue to press for
balanced trade. Beijing's increased emphasis on
earning hard currencies in the international market
may make it reluctant to provide all the oil P'yong-
yang wants for its west coast oil refinery and to
continue to subsidize prices.
? North Korea has paid for Iranian oil with arms, but
even this arrangement is not a sure bet for increas-
ing or even maintaining import levels. With a rise in
Chinese arms sales, Tehran may be less willing to
purchase poorer quality North Korean arms. Nor
are the Iranians likely to extend new credits or to
accept other North Korean goods-most of which
are of poor quality-in exchange for oil.
As a result, we believe that North Korea can expect
little increase in oil imports during the next few years.
Table 1 Thousand barrels per day
North Korea: Estimated Oil Imports a
1982
19
17
15
51
1983
13
18
15
46
1984
12
19
12
43
1985
14
18
10
42
1981-85 average
15
17
12
44
a Includes imports of petroleum products, which we estimate have
averaged less than one-fifth of the total in the 1980s.
b We have estimated the volume of imports from the USSR and
China, which these countries report only in value terms. In the case
of the Soviet Union, we have used the calculated CEMA price for
each year to determine the volume. In the case of China, we have
used a midpoint, assuming the Chinese discount their oil to North
Korea by 20 to 40 percent of the world market price.
Finally, domestic production of oil offers little hope
for relieving North Korea's petroleum problems.
P'yongyang's efforts to find onshore and offshore oil
appear to have met with little success, although
exploration continues with Soviet participation. And
the North is still looking in the West for oil explora-
tion and exploitation equipment-so far without much
success. Even if P'yongyang discovered sizable oil
deposits, full exploitation would be many years away.
Outlook
We believe energy shortages will continue to be the
norm for North Korea. The leadership could give the
energy sector, as well as other parts of the economy, a
nudge by allowing experts a greater role in decision-
making, increasing incentives to managers and work-
ers, and reducing redtape.
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If P'yongyang diverted investment resources to energy
as well as to transporatation and other infrastructure
projects, progress could be possible. Such a move
would mean a cutback in new productive facilities-
factories that produce steel and machinery, for exam-
ple-but would ease the many bottlenecks that pre-
vent existing plants from operating even close to full
capacity. Nonetheless, we see no signs that changes of
this scope are even being considered in P'yongyang.
Indeed, like other areas of the economy, the North's
problems with energy reflect the consequences of its
priorities on the defense industry, an almost 40-year-
long commitment to autarky, and an unwieldy cen-
tralized and personalized top-down management sys-
tem. We do not expect P'yongyang to come to grips
with it difficulties in developing and managing this
sector any more quickly than it has in dealing with its
problems in others.
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Figure 3
Major Energy Facilities
ELECTRIC POWER
Hydroelectric
Thermal
PETROLEUM
e Exploration
Refinery
2
-6r
"a
Hamhun
Imnam
Dam l
Sbdu-su
Project
sovie
YnI
Boundary repreeentatlon Is
not necessarlly authoritative
Dam under
construction
Water tunnel under
construction
'Anju
Yung ni
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Appendix
Details on Energy Availability
Coal
North Korea's major coal deposits are primarily in
the central and northeastern regions, with the Anju
area producing roughly two-fifths of coal output (see
figure 3). Reserves are an estimated 8 to 12 billion
tons, which is adequate for more than 100 years at the
present rate of use. Anthracite accounts for about
two-thirds of coal reserves, and lignite and bituminous
coal for the remainder. Although production of hard
and bituminous coal'rose from an estimated 22 mil-
lion tons in 1970 to 52 million tons in 1984, it fell
short of the Seven-Year Plan (1978-84) target by
P'yongyang pays for coking coal from China with an
equal value of anthracite. The North's metallurgical
plants consume nearly all the coking coal it purchases.
Electric Power
North Korea's electric power industry-now equally
divided between hydropower and coal-had an in-
stalled capacity at the end of 1986 of approximately
6.5 million kilowatts, more than twice the 1970 level
but far short of the approximately 12 million kilo-
watts needed to fulfill the 1978-84 elan for outnut
North Korea failed to reach the 1978-84 Seven-Year-
Plan target of 50 to 60 billion kilowatt-hours by 1984
(table 3 presents a list of major electric power plants
roughly one-third (see table 2).
About two-thirds of the North's domestic coal sup-
plies generate electric power, with the remainder
being used by coal-burning locomotives, factories that
rely on coal-based chemicals to produce rayon and
vinylon, and small users and households. In addition,
P'yongyang has commitments for exports of about 2
million tons of coal annually to China, although it
often falls short because of domestic demands.F
The North has no known deposits of high-quality
coking coal and, thus, must rely on imports. In 1984 it
imported more than 2 million tons from China-by
far the largest supplier-the USSR, and Poland.
in North Korea).
Because P'yongyang is stressing the construction of
thermal power plants, the share of hydroelectric 25X1
plants in total output has fallen from more than four-
fifths in 1970 to roughly one-half in 1986. Hydroelec-
tric power plants do not produce uniformly through-
out the year because reservoir levels vary both with
fluctuations in precipitation and use of the water for
irrigation. The fact that hydroelectric plants take
longer to build than thermal plants and require larger
capital investment is probably also behind the shift.
P'yongyang has had to rely heavily on imports-
largely from the USSR-for equipment for its power
plants. Most North Korean hydroelectric power
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Table 2
North Korea: Estimated Energy Production, 1970-93
1982 1983 1984 Planned for 1985 Planned for
1978-84 a 1987-93 b
Total coal
(million metric
tons)
28
35
41
56 58
Electric power d
(billion kilowatt-
hours)
14
18
20
23 24
a The Second Seven-Year Plan.
b The Third Seven-Year Plan.
c Includes bituminous coal.
d Includes output from thermal (mainly coal powered) as well as
from hydroelectric power plants.
plants were built by the Japanese and refurbished and
expanded with Soviet and Czechoslovak assistance
after the Korean war. The Soviet press has reported
that nearly two-thirds of the North's electric power
output comes from Soviet-built plants and that plants
constructed with Soviet assistance in the 1970s en-
sured a 40-percent increase in electric power. We
have no evidence to dispute the Soviet claim. The
USSR has been involved in the construction of three
thermal power plants that account for nearly all of the
country's thermal capacity-the Pukch'ang, P'yong-
yang, and Ch'ongjin (see figure 4). The North Kore-
ans also have received assistance from the Chinese in
the construction of power plants-the Sup'ung-ho and
Yunfeng hydroelectric plants on the Yalu River, with
output shared between the two countries (see figure 5).
Paengma-ri, which came onstream in 1978. Chinese
oil is heavier than the other oil North Korea imports
and is suitable only for this refinery; the lighter Soviet
and OPEC oil can be used in either refinery. We
estimate that the crude oil charge capacity of the
Sungni refinery is about 40,000 b/d and of the
Paengma-ri about 34,000 b/d. Most of the North's oil
imports now consist of crude, which the USSR deliv-
ers mainly by rail and China primarily by a pipeline
from the Dandong area of China. In 1985 the USSR
provided about 33 percent of North Korea's oil im-
ports, China about 43 percent, and Iran the remain-
der.
The North's main oil consumers are the military,
transportation, agricultural, and fishing sectors. Oil is
also used in the manufacture of petrochemicals-
notably at a petroleum-based urea plant imported
from Austria and at an acrylonitrile plant purchased
Petroleum
North Korea does not produce crude oil or natural
gas, and before construction in the early 1970s of the
first of two oil refineries-the Sungni Chemical Plant,
which was built by the USSR in Unggi (see figure
6)-P'yongyang imported all of its petroleum prod-
ucts. The Chinese built the North's second refinery in
from France.
Availability of oil has not-on average-increased in
recent years, although demand presumably is grow-
ing. Imports have fluctuated with North Korea's
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Table 3
North Korea: Major Electric Power Plants a
Capacity Remarks
(kilowatts)
Pukch'ang TPP 1,600,000 Built with Soviet assistance. All 16 generators were operating as of
June 1985.
P'yongyang HTPP 500,000 Built with Soviet assistance.
Anju HTPP 300,000 North Korea is seeking equipment and technical assistance from
Poland, Switzerland, and Austria for another power plant (consist-
ing of four 250,000-kilowatt units) at Anju.
Unggi TPP 200,000 Only North Korean thermal power plant that uses oil rather than
coal.
Ch'o'ngjin TPP 100,000 Built with Soviet assistance. Two generators were operating as of
June 1985 and a third generator reportedly was completed in
December 1986.
Sodu Su HPP 450,000 Also known as Ch'o'ngin HPP; consists of three plants.
Hochon 1-4 348,000 Consists of four plants: Honggum Ni HPP, Hochon Up HPP,
Sangnong Nodongjagu HPP, and Pinaechon HPP.
Sinhung HPP 200,000 Consists of four plants.
Pujon 1-4
Hagaru Ri HPP 334,000 Consists of four plants; also known as Changjin 1-4.
Kanggye HPP 1-3 221,000 Consists of three plants.
Sup'ung-ho HPP 630,000 Joint Chinese-North Korean project built on the North Korean
side of the Yalu River. This project is known as the Shuifeng Power
Station in China. The project is being expanded by about 150,000
kw on the Chinese side. Half of the output goes to China.
Yunfeng HPP 400,000 Joint Chinese-North Korean project built on the Chinese side of
the Yalu River; also known as Huludao HPP Unbong. Output is
shared by the two countries.
Taipingwan HPP 190,000 Built by China on its side of the Yalu River. Power plant is a joint
venture between China and North Korea. Two generating units
were in operation as of December 1986. The other two were
scheduled to be completed in 1987. Capacity will then total 190,000
kilowatts. Output is to be shared by North Korea and China.
Wiwon HPP 240,000 b A joint Chinese-North Korean project under construction.
810,000 b Under construction. To be powered by water tunneled from four
reservoirs.
a Note: TPP=thermal power plant; HTPP=heat and thermal
power plant; HPP=hydropower plant.
b Projected.
Under construction. Scheduled to consist of five separate power
stations.
Declassified in Part - Sanitized Copy Approved for Release 2011/12/20: CIA-RDP88TOO539ROO0500760002-1
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/20: CIA-RDP88T00539R000500760002-1
Figure 4. North Korea: The
Pukch ang Thermal Power
Figure 5. North Korea-China:
The Joint Supung hydroelec-
tric project on the Yalu River.
Declassified in Part - Sanitized Copy Approved for Release 2011/12/20: CIA-RDP88T00539R000500760002-1
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/20: CIA-RDP88T00539R000500760002-1
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Figure 6. North Korea: The Sungni Chemical
Plant, one of the country's two petroleum
ability to pay (since the
mid-1970s Moscow has insisted that P'yongyang not
only pay cash for its imports but also that it make at
least some payments on its more than $600 million in
debt to the USSR.' This has increased the strain on
North Korea's limited export capacity and resulted in
numerous shortfalls in Soviet oil deliveries. We esti-
mate that imports of Soviet crude oil and petroleum
products fell from an average of 24,000 b/d in the
period 1978-80 to 17,500 b/d in 1981-82 and to only
13,000 b/d in 1983-85.
Imports of oil from China appear to have remained
steadier over time than those from the USSR.
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ZoA]
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we believe-on the basis of Chinese
value data and assuming a 20- to 40-percent price
discount-imports averaged between 15,000 b/d and
21,000 b/d during 1978-85.
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Declassified in Part - Sanitized Copy Approved for Release 2011/12/20: CIA-RDP88T00539R000500760002-1
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/20: CIA-RDP88T00539R000500760002-1
Secret
Secret
Declassified in Part - Sanitized Copy Approved for Release 2011/12/20: CIA-RDP88T00539R000500760002-1