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South Korea's State Oil Body Set for Regional Expansion

Posted on: Wednesday, 28 September 2005, 09:00 CDT

Text of report in English by South Korean news agency Yonhap

Seoul, 28 September: South Korea will seek to transform its state- run oil company into a major energy developer in Northeast Asia as part of efforts to tackle high-flying oil prices, the nation's top energy policymaker said Wednesday [28 September]. Also, the government plans to set up an energy fund to finance overseas oil exploration and development projects as well as take other energy- saving measures, Minister of Commerce, Industry and Energy Lee Hee- beom said.

The plan, unveiled at a meeting of the national energy advisory committee, comes amid runaway oil prices that have been dealing a harsh blow to South Korea, the world's fourth-largest crude buyer, which depends entirely on imports for its oil needs.

"It is important for domestic companies to advance into foreign countries to secure stable sources of energy," Lee reported to President Roh Moo-hyun, who chaired the meeting. The government will try to turn the Korea National Oil Corp (KNOC) into a company with a daily oil production capacity of 300,000 barrels by 2013, according to the plan.

To that end, the assets of the state enterprise will be increased to around four trillion won (3.86bn US dollars) by that year from the current 1.1 trillion won. The state-run Export-Import Bank of Korea will also extend more trade finance lines to the KNOC to help bankroll its overseas oil development projects.

In order to facilitate overseas exploration and development, the envisaged fund is to pool a total of 16 trillion won, half of which will come from the private sector. "If the new energy plan goes without a hitch, South Korea will be able to introduce oil and other energy more cheaply," the minister said. The plan's success would help South Korea raise the percentage of oil pumped from oil fields it controls to 18 per cent from the present 3.8 per cent. South Korea's exports of energy plants would reach 20bn dollars, accounting for 2.5 per cent of the global market, the minister predicted.

Soaring oil prices have been a drag on the Korean economy, which is struggling to pull out of a slump in domestic demand that was sparked by the collapse of a consumer credit bubble in late 2002. Last year alone, South Korean imports of oil and other energy products jumped 29.5 per cent from a year ago to 49.6bn dollars, or 22.1 per cent of total imports. Inbound shipments of crude oil surged 29.1 per cent to 29.9bn dollars.

President Roh said the expansion of the KNOC's potential is aimed at providing oil exploration and development continuity. He added that efforts to build up the state oil company could enable the country to avoid the past mistake of halting overseas energy development endeavours if oil prices are low. Roh said support of the KNOC did not in any way constitute discrimination against private oil companies, and both public and private sectors should be built up together. "The government's energy policy must be approached as a long-term effort that requires single-mindedness and drive," the president said.

Source: BBC Monitoring Asia Pacific

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