KNOC Aims to Expand, Diversify to Meet Oil Needs
By Kim Hyun-cheol
The Korea National Oil Corp. (KNOC) is energizing itself into a key oil and gas exploration arm of the country. This effort is being led by CEO Kang Young-won, a former president of Daewoo International, and comes at a time when ``energy security'' predominates the national agenda.
Fluctuations in oil prices earlier this year reminded Korea that it is vulnerable, triggering an all-out effort to secure stable
Established in 1979 as the Korea Petroleum Development Corp., KNOC started with a primary mission focused on the exploration and development of oil and gas resources.
It has broadened its area of business from this to the storage of petroleum resources.
Reflecting the importance of energy security, its top priority is to raise the country's self-sufficiency in oil and gas. Again, the key word is ``expansion.''
``Ultimately, this will further improve energy security and ensure continued development of the national economy,'' CEO Kang recently said. He ordered a recently concluded two-month review of its business priorities in an effort seen to fit his new vision for the oil company. Kang's order for the review is well warranted, considering the nation's growing appetite for energy.
Being the world's fifth largest oil importer and seventh largest in oil consumption, Korea has to strategize to secure energy supplies. The point takes on added importance, considering major oil producers are using fossil fuel resources as a weapon to give them the upper hand over non-producing countries.
Thus, Kang's other key word is ``diversification.'' Almost 80 percent of oil imports are from the Middle East, where the possibility of regional conflict often flares up at the risk of sustainable supply.
Besides, for the national economy, developing overseas oil fields is more cost-efficient than imports, helping promote the competitiveness of refineries.
Compared to other oil firms, the KNOC has a short history but its growth has been fast.
Currently, the company is working on a total of 39 projects in 17 countries producing 50,000 barrels of crude oil per day.
In 1987, KNOC discovered natural gas on the domestic continental shelf and completed the development of a gas field off the eastern coast in 2004. It made Korea the 95th gas-producing country in the world, with current daily production reaching 50 million cubic feet of natural gas and 1,000 barrels of liquefied gas.
Overseas, KNOC completed the Rong Doi gas field in Block 11-2 in Vietnam in November 2006 in the first case of the successful independent development of an overseas gas field by a Korean company.
KNOC was responsible for the entire process, from exploration to production, with production facilities built by Hyundai Heavy Industries.
In Korea's first overseas gas field development project, it is expected to produce up to 47.5 billion cubic feet of natural gas and 1.53 million barrels of liquefied gas over the next 23 years. At current prices, this is valued at $500 million.
In 2006, the KNOC bought ``blackgold oil sands'' in Alberta, Canada, with an estimated capacity of 216 million barrels of oil. Its latest major oil projects include the OPL 321 and 323 fields in Nigeria, four oil blocks in Kazakhstan, the Aral Sea project in Uzbekistan and another four blocks in Yemen.
Aggressive expansion is also intended for West Africa, the Middle East, the Caspian Sea area, Northeast Asia, Southeast Asia and North America.
KNOC has set out to further hone its exploration technology with an injection of 19 trillion won by 2012, calling for the daily production of 300,000 barrels, about six times its current level.
It will promote more oil field purchases and take over other oil firms, as well as related technology and professional manpower.
In its five-year plan, its asset size will have grown to 30 trillion won from the current 9.4 trillion won, the company said. The government will invest about four trillion won and the rest will be self-financed, KNOC said.
``The ultimate goal is to solidify the company's base in development. In the long term, non-development parts will be rearranged or outsourced allowing more manpower to be deployed to key development work,'' a KNOC spokesman said.