This undated photo file shows oil-refining facilities in South Korea. (Yonhap)
The state-run Korea National Oil Corp. (KNOC) lapsed into a complete capital erosion in 2020 as its liabilities exceeded assets due to continued losses, data showed Tuesday.
KNOC's liabilities stood at 18.64 trillion won ($16.7 billion) as of the end of last year, up nearly 514 billion won from a year earlier, according to the data posted on the state portal All Public Information in One (ALIO).
In contrast, its assets amounted to 17.5 trillion won, down 1.12 trillion won from the previous year.
It marks the first time since the state oil company's inception in 1979 that it has suffered from full-scale capital erosion.
KNOC's debt came to 3.5 trillion won in 2006 before exceeding 20 trillion won in 2011. Its liabilities remained in the 17 trillion-won range in 2017-18 and rose to 18.1 trillion won in 2019 before overtaking its assets last year.
The ratio of KNOC's interest-bearing debt to total assets came to 83 percent as of end-December. The firm's interest bearing debt reached 14.7 trillion won last year, with its annual interest burden surpassing 400 billion won.
KNOC's huge debt stems mainly from losses incurred from overseas projects it started during the Lee Myung-bak administration of 2008 to 2013.
Making matters worse, the oil company has been hit hard by falling oil prices resulting from the coronavirus pandemic.
Prices of Dubai crude, South Korea's benchmark, came to an average of $42.29 per barrel last year, down 33 percent from the prior year, which made its overseas oil fields less valuable.
To pull out of the huge debt burden, the KNOC has been ramping up self-rescue efforts, including the sale of unprofitable subsidiaries and subprime overseas assets, as well as layoffs.
Yet industry watchers said it will be difficult for the KNOC to solve its debt problem over the short term as its liabilities are expected to reach 20 trillion won in 2024. (Yonhap)