Overseas energy development functions held by state-run energy companies will likely be scaled down or merged in the first half of next year, government sources said Monday.
State-run energy firms including Korea National Oil Corp., Korea Gas Corp. and Korea Resources Corp. are expected to go through massive restructuring in their overseas businesses as the government has vowed to reduce the huge debt incurred by public companies, sources said.
The Ministry of Finance and Strategy, which is responsible for restructuring state firms’ debt, confirmed it would review the overseas businesses of state-run energy companies, but said details of the evaluation and follow-up measures have not been decided yet.
The ministry added that KEPCO will be included in the review as the state-run electricity company also has invested in mines for natural resources overseas.
“We found that the nation’s leading energy companies had made irrational and overlapping investments in some overseas energy projects amid heated competition under the previous government, which set the nation’s annual target for the energy self-sufficiency,” a ministry official said.
According to data released during the annual parliamentary audit session in October, investment in overseas energy development projects made by KNOC, KOGAS and KORES between 2008 and 2012 reached 43 trillion won ($41 billion), but the return on investment posted minus 400 billion won (-$380 million).
The worst overseas investment case in energy is KNOC’s takeover of the Canadian oil and gas trust Harvest for $3.8 trillion won in 2009. Harvest reported a net loss of 820 billion won in 2012. KNOC is trying to sell non-core assets of Harvest now.
Industry sources forecast that the ministry will try to merge overseas business-related functions of energy firms into one or two business units, and create a consultative body to prevent overlapping in overseas investment.
In response to the ministry’s move to restructure overseas energy development projects and business units, energy firms expressed mixed reactions, raising concerns of a fall in overseas energy development activities.
“The government’s rush to restructure overseas energy development businesses could deal a blow to new investment plans, which often require a decade-long investment,” a high-ranking KOGAS official said under the condition of anonymity.
By Seo Jee-yeon (email@example.com