South Korea to boost nuclear share, lift coal cap, curb LNG amid tensions

The ruling Democratic Party and the South Korean government discussed steps to manage energy supply in response to tensions in the Middle East. They propose boosting nuclear and coal generation while reducing LNG use, with the goal of lifting nuclear reactor utilization to about 80 percent and removing the current cap on coal-fired power generation.

Officials said six reactors are currently under repair, and the plan aims to complete two by the end of the month and four more by mid-June, thereby pushing overall generation toward the 80 percent target from the current upper 60 percent range. The coal-generation cap, which is limited to 80 percent of installed capacity, would also be lifted under the plan.

In addition, the government intends to release 22.46 million barrels of oil from strategic reserves over three months in line with an agreement with the International Energy Agency. It also plans to import 3.35 million barrels from Korea National Oil Corp.’s overseas production in the first half of the year.

The measures include elevating the Yeosu petrochemical complex in Jeollanam-do to a designated industrial crisis area to address shortages of Middle East–sourced inputs such as aluminum, sulfur, and naphtha. Because about a quarter of domestic naphtha supply comes from the Middle East, authorities plan to freeze exports of domestic naptha to previous year levels and pursue alternative import routes.

To aid exporters affected by Middle East tensions, the package raises the cap on transport-cost vouchers from 30 million to 60 million won and introduces emergency logistics vouchers worth about 10 million won for roughly 1,000 Middle East–focused exporters, totaling around 100 billion won. A separate liquidity package would mobilize 670 billion won in policy funds to support small and medium-sized firms; repayment deadlines for affected companies would be extended by one year, and additional interest would not be charged.

On price stability, the plan includes a “one-strike-out” rule for gas stations that violate price controls, with incentives for those that maintain stable pricing and the option of license cancellation after a first violation for repeat offenders. The government said it would push ahead with a supplementary budget through the National Assembly, aiming for rapid review and passage by month’s end.

Part of the broader fiscal agenda involves exchange-rate stabilization legislation under review in the National Assembly. One provision would allow a 100 percent cut in capital-gains tax for investments made with foreign stock sale proceeds routed through the domestic market-return account, part of what the authorities call the three laws to stabilize foreign exchange markets.

Why this matters for the United States: South Korea is a major consumer of energy and a global hub for technology, manufacturing, and petrochemicals. Its energy posture—especially the balance among nuclear, coal, and LNG—can influence regional energy prices, LNG markets, and supply chains that feed U.S. electronics, automotive, and chemical industries. The emphasis on emergency oil reserves, refinery feedstocks, and rapid budgetary responses signals how Seoul intends to shield its economy from external shocks, with potential implications for U.S.- Korea energy cooperation, markets, and security considerations.