The ruling party of South Korea says that the country will lift its coal cap and increase nuclear production amid the Iran crisis.

South Korea's ruling Democratic Party announced on Monday that the government would lift limitations on coal-fired power generation and increase nuclear plant utilisation to as much as 80%, as part of a response to the Middle East Crisis.

In a briefing, members of the Middle East Crisis Economic Response Task Force of the party said that the measures were intended to stabilise energy prices and supply as tensions along the Strait of Hormuz have blocked oil and gas supplies from South Korea.

According to Korea International Trade Association data, South Korea imports most of its?energy. It buys about 70% of its oil, and 20% of its liquefied gas (LNG), from the Middle East.

Ahn Dogeol, a Democratic Party legislator, said that the government would prioritize managing LNG supplies through increasing coal and nuclear production while reducing reliance upon LNG-fired electricity generation.

Ahn announced that the coal power production limit of 80% would be lifted on Monday. Maintenance work on six nuclear reactors will also be completed earlier to increase?nuclear utilization from high 60% range to 80%.

South Korea introduced a cap on gasoline prices at 1,724 won per litre ($1.15)?on Friday. The price will be adjusted every two weeks in order to reflect the changes in oil prices around the world.

Ahn stated that the gasoline and diesel price on Sunday fell by 58 and 77 won each litre since the price cap had been implemented.

ADDENDARY BUDGET

Ahn stated that a supplementary budget will be prepared by the end this month and presented to parliament. Ahn said that the extra budget would include payments for energy vouchers, compensation to refiners for fuel price caps, logistic cost support for exports, and increased investment in renewable energies.

In a separate meeting of the Democratic Party on Monday, Jung Chung Rae stated that they would expedite passage of any extra budget proposals within 10 days after submission.

Budget Ministry has not yet decided on a date for a supplementary budget but will prepare one as quickly as possible.

Ahn said that the ruling party and the government also considered designating Yeosu as a Special Industrial Crisis Response Zone.

He said that there were severe shortages of raw materials like aluminium, naphtha, and sulphur, and that price spikes and supply disruptions, which are largely due to the Middle East, could force petrochemical firms to reduce production.

Ahn stated that the government will 'freeze exports domestically produced naphtha to last year's levels, and look for alternative sources of imports, in order to address this.

Ahn stated that the task force also agreed to double export vouchers to 60 million won, and introduce emergency logistic support vouchers to exporters to the Middle East.

(source: Reuters)