KOREA National Oil Corporation (KNOC) signed a contract to acquire Harvest Energy Trust for 3.95 billion dollars (4.07 billion Canadian dollars) on October 22, 2009 in Calgary, Canada. The deal is expected to be completed by the end of December, as steps such as Canadian governmental approval remain. The Korean government and KNOC have promoted M&As of overseas oil developers based on the Plan to Scale Up KNOC from 2008 to 2012, which was established in June 2008 with a budget of 4.1 trillion won. The acquisition is expected to lay the foundation for successful promotion of this plan.
Harvest Energy Trust is based in Calgary, Canada, and listed on the Toronto and New York Stock Exchanges. The number of employees is roughly 950, including 380 experts in oil development, and has a daily production of 53.4 thousand barrels, with 35 thousand barrels of oil and 18.4 thousand barrels of gas. As of January, 2009, the company recorded reserves of 219.9 million barrels of oil, gas, and oil sands.
The acquisition will enable KNOC to increase the daily production from 188 thousand to 241 thousand barrels, an increase by 53 thousand barrels, as well as increase the country’s self-sufficiency rate to 8.1% from 6.3%. It is also expected to take over about 380 experts in oil development and enhanced oil recovery, technologies to enhance the amount of crude oil that can be extracted from an oil field, as well as new technologies, improving the competitiveness of KNOC in terms of development.
The deal will help KNOC obtain technologies related to the development of oil sands and CBM (Coal bed methane) and produce synergistic effects from the development of Canada’s Black Gold Oil Sands promoted by KNOC. Canada is the world’s third largest crude oil deposit (178.8 billion barrels) with about 88.5% of crude oil produced in Canada coming from the western part of the country, an area considered to be the center of oil development in North America.
The deal is expected to help KNOC accelerate future purchases and M&As of overseas oil fields and grow into a global oil developer. As for other regions, KNOC started drilling in the Bazian oil field of Iraq’s Kurdistan region on October 1 this year, with results expected at the end of the year. The deposit in the Bazian oil field is 3.1 billion barrels, three times of Korea’s total oil reserves secured as of June, 2009. KNOC also won the bid for Iraq’s Zubair mining lot, with reserves of 6.6 billion barrels, on October 13. This is the first acquisition of a field owned by Iraq’s central government. The deal, which enabled the company to own 20% of the lot, is expected to produce 20 thousand barrels per day for the next 20 years. KNOC will promote the second bidding expected in December.
The acquisition of Harvest Energy Trust is the largest deal among others, including development of the Surgil gas field in Uzbekistan (96 million tons) and the Jambil oil field in Kazakhstan (1 billion barrels), the long-term contract to introduce natural gas with Russia (7.5 million tons for 30 years from 2015), and acquisition of Petro-Tech of Peru for 900 million dollars.