STX Group looks to resources, energy to support future growth

Conglomerate focuses on overseas resources as it seeks No. 7 spot among Korean business groups


STX Group is looking to develop its energy and resource development business into a major part of its portfolio that will generate a quarter of its revenue target set for 2020.

Under the “Vision 2020” plans announced in April, the group aims to raise its annual revenues to 120 trillion won ($102 billion) by 2020, giving it a place among the country’s seven largest conglomerates.

As it drives toward that goal, the group is placing much importance on energy and resource development businesses and hopes to develop them into businesses with combined annual sales of 30 trillion won and operating profits of 2.4 trillion won.

While the plans were announced relatively recently, the group has been pushing related projects for some time led by STX Corp. and STX Energy.

In 2006, STX Group collaborated with the state-run Korea Resources Corp. to invest in a nickel mine in Madagascar. The deal gave the Korean consortium priority rights over 50 percent of the mine’s 60,000 metric ton annual output.

In addition, STX Energy and STX Corp. have secured stakes in a number of overseas mines and oil fields. The group’s overseas resource development stakes include a 15 percent stake in a Chinese coal mine, and between 10 percent and 25 percent stakes in offshore oil fields being explored by Royal Dutch Shell.

STX Energy has also worked with Korea Gas Corp. in securing stakes in a gas development project in Uzbekistan in February 2008.

The shipbuilding group has also purchased 40 percent of a coal mine in Indonesia, gaining management rights as well as the rights to market the 2.4 million metric tons of coal the mine is projected to produce on an annual basis. According to the company, the project will generate an estimated $100 million in the coming 15 to 20 years.

“As can be seen, STX Group’s resource development business is being conducted in several locations at the same time, but recently projects in North America stand out,” a STX Group official said.

In December 2010, STX Energy acquired stakes and management rights in an oil field in the state of Alabama in collaboration with Korea National Oil Corp.’s U.S. subsidiary Ankor E&P Holdings.

“Using projections for oil prices and the oil field’s production estimates, the project is expected to generate 10 billion won each year over the coming 15 years.”

In addition to the U.S. oil field, the company acquired a 100 percent stake in the Maxhamish gas field in northern Canada last August.

While the group’s energy business remains in the early stages, STX Energy has passed some significant milestones.

In January, STX Energy became the first private company to set foot in the country’s power industry when it was signed on to build a coal-fueled power station in an industrial complex in Donghae, Gangwon Province.

In the project, in which two 500 megawatt generators will be built, the company will foot 51 percent of the investment required. The remainder will be funded by Korea East-West Power Co.

“The power plant project is expected to have synergy effect with all of the group’s businesses from overseas resource development to shipbuilding, and solar and wind power businesses,” a STX Group official said.

“In addition, the experience gained from building a large power station is expected to provide the foundations for expanding into overseas markets.”

By Choi He-suk  (cheesuk@heraldcorp.com)