Streamlining Overseas Projects
An inspection result shows that three state-run companies, including the Korea National Oil Corporation (KNOC), should sell 10 overseas resource development projects suffering from low profitability.
The Board of Audit and Inspection (BAI) released “Overseas Resource Development Project Result Analysis” on Nov. 30. It analyzed the strategic value and profitability of 59 out of 99 overseas resource development projects carried out by the KNOC, the Korea Resources Corporation (KORES) and the Korea Gas Corporation (KOGAS), and concluded that 10 projects, or nearly 17 percent, should be subject to review for sale.
About 1 trillion won (US$863.56 million) should be invested in these 10 projects in the future. They include part of Harvest Project in Canada and Dana Petroleum Project in the U.K.
The BAI predicted that the number of projects subject to sell will be expanded to 21 if the market conditions get worse, including the continuous decrease in international oil prices. Until now, a total of 10.5 trillion won (US$8.98 billion) have been injected into 21 projects, including 10 projects subjected to sell first, and 14.5 trillion won (US$12.52 billion) should be additionally invested in the future. On the other hand, 38 projects showed good results in both strategic value and profitability.
In addition, the BAI said that the three state-owned companies need to invest a total of 46.6 trillion won (US$40.24 billion) in 48 projects in the future. Among them, they are expected to invest 24.5 trillion won (US$21.16 billion) in the next five years. In a bid to meet the cost, they need 7.9 trillion won (US$6.82 billion) of debts, which has more than doubled from 3.4 trillion won (US$2.94 billion) from earlier expectations. In this case, the debt rate of the KNOC will rise from 221 percent in 2014 to 320 percent in 2019, while the figure of the KORES will surge from 22 percent in 2014 to 590 percent.
The BAI also announced that the three public companies carried out 22 projects worth 35.4 trillion won (US$30.57 billion) from 2011 to 2013 without conducting preliminary feasibility studies.