General trading companies in Korea are transforming themselves from groups of desk-bound workers to field-oriented workers trotting the globe in search of petroleum and mineral resources. Industry experts are saying that their slump as of late in overseas trade, the most important business item for such companies, is driving them into the new business at a fast pace.
Hyundai Corporation is no exception. Past its heydays back in the 1970s and 1980s, when it was one of the companies most coveted by local college graduates, it is now concentrating on overseas natural resources development to better meet the needs of time.
Hyundai Corporation’s natural resources development activities are in progress in a wide variety of fields, including an LNG development project in Oman that started actual production in February 2000. Hyundai participated in the undertaking in 1997 by acquiring 1% of the shares and has enjoyed strong dividend income since 2001. At present, 7.1 million tons of gas is known to be produced each year through the project.
In 1998, Hyundai Corporation took part in a similar LNG project in Yemen. The purpose of the two LNG production plants, having a combined annual capacity of 6.9 million tons, is to turn natural gas developed above the ground approximately 175km away to the east from the capital city of Sana’a into liquefied natural gas at the Balhaf Port in the southeastern region of the country.
In the meantime, it has been in contract with the Ras Laffan LNG Production Plant in Qatar, which began to produce 6.8 million tons of LNG a year in August 1999, to supply 4.8 million tons of the material with the Korea Gas Corporation (KOGAS). Hyundai is in possession of 0.4% of shares in the plant. In Vietnam, it owns 4.8% shares in the 11-2 Gas Field, which was declared commercially viable in 2003 after the discovery of gas in 1998. Its possible reserves are estimated at approximately 18 million LNG-equivalent tons.
Hyundai Corporation has also written many success stories in the development of coal and other mineral resources. It started the production of bituminous coal in 1983 at the Drayton Coal Mine in Australia, where it has a 2.5% share. The company concluded a joint venture agreement for the purpose in January 1981 and achieved operating profits of US$2 million in 2011. The license is valid until 2016. The Drayton Coal Mine Development Project is the first large-scale overseas natural resources development project led by a private-sector company in Korea. Hyundai expects the project will contribute to the stable domestic supply of coal and its penetration of the African market down the road. It is currently planning to accelerate the development of strategic minerals, such as soft coal, copper and iron ore, more aggressively than ever.
More recently, Hyundai Corporation joined the development of the Ambatovy Nickel Mine in Madagascar in August 2010, when it formed a consortium with Hyundai Heavy Industries and acquired 2% share. According to the company, the acquisition of the shares has led to the diversification of mineral supply sources from the Middle East, Australia and Vietnam to Africa, and expansion of the business scope from soft coal, petroleum and natural gas to nonferrous metal.
Now, Hyundai Corporation is working on shale gas as well, which is one of the most rapidly emerging energy sources of the future. It is doing studies on project participation in the United States, while mulling over joining the consortiums of the Korea National Oil Corporation (KNOC), the KOGAS, and major local and foreign developers in the private sector, etc. “We’ll be focusing more on equity investment during the early days of such projects and moving to purchase mining lots with time, engaged directly in the operation and management,” said the company.
It is said that Hyundai Corporation has the best conditions for overseas natural resources development. The strength lies in its numerous business sites and networks that were set up in the past for foreign trade. “The success or failure of an overseas natural resource development project is determined during the early, information gathering phase,” said an industry insider, adding, “It is because of their forte in terms of information gathering capabilities that general trading companies, including Hyundai Corporation, could change their business direction with such ease.”