The business prospects of Korea Gas Corp. (KOGAS) were not rosy in 2014. The fact that the company logged a 203.6 billion won loss in 2012 seemed to spark a widespread sense of a crisis among KOGAS employees. Now one year later, KOGAS has turned the corner — surging to a record high 447.2 billion won in 2014 net profits, a jump of 650.8 billion won from the 203.6 billion won loss in 2013. 

The company also saw its assets rise 3.105 trillion won to 46.772 trillion won during the same period. The secret in overcoming the crisis is owed to KOGAS’s strengthening overseas businesses and the maximizing of management efficiency. 

KOGAS’s 2014 business performances from overseas business arenas were remarkable. The company saw net profits from the Zubair oilfield project in Iraq and a project in Myanmar climb to 114.3 billion won and 46.2 billion won, respectively. The Myanmar project has just begun production. And net profits from KOGAS’s equity investments into the Yemeni liquefied natural gas project also surged by 51.9 billion won. 

As overseas projects are on track, KOGAS is expected to reap more than 250 billion won in revenues from them each year, albeit a drop is expected from decline crude oil prices. 

The company has countermeasures in place to cope with a potential rise in risks, caused by the expanding of overseas projects. KOGAS has overhauled the feasibility evaluation of each project in consideration of its characteristics and national risks, determining a discount rate based on the weighted average cost of capital (WACC), which is a departure from the conventional method of tangible common equity ratio. The company has secured an additional 1.5 trillion won credit to combat any future liquidity crises. 

Overseas projects are managed according to five classification groups — A+, A, B, C, and D — based on profitability and volatility, said a KOGAS official, adding that each project’s monthly financial risks are monitored lest repayments of loads are concentrated at any specific years. 

KOGAS has been collaborating with Korean SMEs in making inroads into foreign markets. 

The company has so far accompanied SMEs for the execution of eight E&P projects. The number of companies with which KOGAS has collaborated reached as many as 20 as of the end of last year. Cumulative amounts of winning orders total $10.6 billion. 

The company’s efforts to promote shared growth in such Korean industries as shipbuilding and plant engineering have resulted in the hiring of 4,380 people from 58 SMEs. KOGAS hosted Gastech 2014 and offered an exhibition area so that 22 SMEs could display their products, an opportunity to have one-on-one business meetings with prominent foreign energy companies and be given chances to explore foreign markets. 

Maximizing Management Efficiency

KOGAS’s retrenchment efforts, including cost reduction, have led to 125.3 billion won in budgetary savings, partly contributing to the record-high net profit. The company has also redoubled efforts to promote financial soundness through debt reduction. 

KOGAS has been implementing plans to normalize eight lax management practices and strengthening performance-based pay systems after seeing eye-to-eye with labor. 

“KOGAS has maintained solid growth through the years with tireless innovation efforts and entrepreneurial spirit, and the driving force propelling us forward this whole time has been our founding philosophy, which is to always ensure that Korea has a safe and stable supply of natural gas,” acting KOGAS President Lee Jong-ho said. With the world’s largest total storage capacity, he said KOGAS has helped increase Korea’s natural gas supply rate up to 75 percent, making life more convenient for everyone through accessible energy.

Today, KOGAS is involved in a number of exploration, development and production projects around the world in a bid to make Korea’s already stable supply of gas energy greater than ever before. 

“We have been able to achieve all these remarkable feats as a result of KOGAS employees’ tireless passion and commitment,” the company said. “We always strive to measure up to the high expectations Koreans have of us as the nation’s leading energy company.”

KOGAS is contributing to a higher quality of life in Korea through the stable supply of natural gas. Supplying natural gas safely and stably through a pipeline network that spans 4,240 km, KOGAS is playing an important role not just in the economic growth of Korea and the country’s balanced growth, but also in heightened public welfare and the preparation of a long-term stable supply of natural gas. 

Based on sound analysis and forecasts related to market demand trends, KOGAS purchases natural gas for immediate use, while putting a certain amount in reserve for emergencies and diversifying procurement lines. In the future, KOGAS will continue to proactively develop natural gas supply plans in line with Korea’s energy master plan for the stable production, storage and supply of gas energy to the nation.