Korea Gas Corp. (KOGAS) is beginning to obtain good results in overseas projects, offsetting the losses incurred in resource development projects.
The state-run company is pushing ahead with a total of 25 projects in 23 countries around the world in order to secure a stable supply of natural gas and create future growth engines. Its projects include natural gas exploration, development and production, liquefaction of liquefied natural gas (LNG), and construction and operation of overseas gas pipe lines and LNG terminals.
A spokesperson of KOGAS said, “We have contributed to the reduction of natural gas prices for the people by creating nearly 1.40 trillion won (US$1.23 billion) of profits in overseas LNG projects until the end of 2017. Our exploration projects in Myanmar and Mozambique are considered as successful cases of resource development in the domestic industry.”
In particular, KOGAS is successfully carrying out the Coral South floating liquefied natural gas (FLNG) project and the Rovuma LNG project in the Area 4 of Mozambique. These are the largest resource development projects run by a domestic company. KOGAS has also succeeded in exploration of A-1 and A-3 gas fields in Myanmar in cooperation with Posco Daewoo Corp., the trading and energy development unit of South Korean steelmaking giant Posco Group.
KOGAS posted 42.20 billion won (US$37.18 million) in net profit in overseas projects last year. An official from KOGAS said, “This is the result of a strong showing in the Gladstone LNG (GLNG) project in Australia and the gas fields in Myanmar as well as our strong self-effort measures, such as disposal of unprofitable businesses and reduction of expenditures. We recovered 709.40 billion won (US$625.02 million) of investment, raising our investment recovery rate by 4 percent.”
KOGAS also strengthened joint marketing activities with its partner companies and created an additional 7 billion won (US$6.17 million) of profits in the Badra and the Zubair fields in Iraq. In addition, the company made an every effort to increase profits by cutting 69.70 billion won (US$61.41 million) of costs through stronger competitive bids and conversion of leasecontracts and getting a refund of 13.60 billion won (US$11.98 million) of tax surcharges through the litigation with Indonesia’s taxauthorities related to the DS LNG project in the country.
Notably, KOGAS is planning to introduce LNG from the Prelude project in Australia, which has started first commercial operation in December last year, in the first half of this year for the first time. Kim Young-doo, acting president of KOGAS, said, “We will actively participate in overseas natural gas infrastructure projects in emerging markets based on the world’s best technology and network in order to jump up to be a global leading LNG producer.”
KOGAS is recovering its business showings at a rapid pace but it had difficulties from the poor performance in overseas resource development projects in the past. The company revealed the findings of its self-investigation on the past resource development projects overseas in July last year. The report said it recovered only US$2.53 billion (2.87 trillion won) out of US$10.80 billion (12.26 trillion won) of total investments in 26 projects across the world.
The amount of losses incurred in the Akkas gas field in Iraq and the West Cut Bank gas well in Canada stood at US$3.20 billion (3.63 trillion won).