The South Korean energy ministry has said the government intends to do this from 2006 onwards by allowing individuals and firms to import, produce and sell such fuels.

The fuels covered under the proposed ruling include liquified coal, orimulsion and biofuels. Biofuels are a mixture of ethanol and gasoline. Orimulsion is a mixture of water and extra-heavy crude.

“These alternative fuels were not covered by petroleum laws, so suppliers were reluctant to market them aggressively due to fears about incurring penalties," an energy minsitry spokesman said.

"Consumers have also been reluctant to buy these fuels as they were unsure about their legal status. We expect the move to help promote consumption of these alternative fuels so that hopefully demand for petroleum products can fall bit."

Under the new rulings, the alternative fuels will now be imposed with import surcharges similar to those applied on all crude oil and petroleum product imports.

Companies selling alternative fuels are also encouraged to maintain inventories equivalent to up to 60 days of local sales from 2009 onwards.