[THE INVESTOR] The South Korean government will tightly restrict state-run energy firms’ new investment in overseas resource development in the midst of low oil prices as the government pushes for sweeping restructuring efforts, the Ministry of Trade, Industry and Energy said on June 30.
The ministry will strengthen monitoring on loss-making overseas assets of public energy firms such as the Korea National Oil, the
Korea Gas and the Korea Resources.
“All their oversea assets will be subject to the government’s assessment test every year and the government will decide the disposition of investments as a result,” Vice Trade Minister Woo Tae-hee said in a briefing.
The move comes as the energy firms have been making massive losses from overseas resource development projects which they won under the former Lee Myung-bak administration as Lee put his policy priority on the businesses amid higher oil prices.
But a recent crude price freefall and other resources took a toll on the stat-run utility firms, resulting in the KORES’ debt ratio to surge to 6,905 percent in 2015 from 103 percent in 2007.
Currently, the KNOC, the KOGAS and the KORES run a combined 91 exploring operations outside South Korea.
“The government will closely oversee their costs and profits in order to improve their financial soundness and increase adaptability to a low oil price trend,” Woo said.
According to the ministry, the KNOC and the KOGAS will sell off their non-core overseas assets to local institutions and investors while the most troubled KORES will phase out resource development businesses.
The ministry also said that it would step up financial management on the companies’ overseas subsidiaries including KNOC’s Canada-based Harvest Energy and Dana Petroleum, the British oil company as well as KORES’s Boleo mining project in Mexico.
By Park Han-na (
hnpark@heraldcorp.com)
