Korea Gas Corp. (KOGAS) President Lee Seung-hoon said the election of U.S President Donald Trump’s will bring about greater uncertainty, but the good news is that his inauguration means new opportunities for Korean energy companies.
KOGAS President Lee is paining a rosy picture over President Trump’s inauguration as it comes to his upcoming energy policies. Lee is apparently feeling confidant that KOGAS can seize opportunities to make a leap forward after learning a bitter lesson: a failure in an unwise attempt to explore overseas resources development projects under ex-President Lee Myung-bak’s government.
“When I took office as KOGAS president in July 2015, I’ve thought my goal during the following three-year term is to build the foundation for the liquefied natural gas business, but I want to give it a try toward my own achievements,” Lee said in a recent interview.
KOGAS plans to aggressively expand in the United States in the era of President Trump’s administration. Automobile and home appliance makers are coerced to raise local production by President Trump’s threats, but energy companies are poised to make the most of President Trump’s energy policies focusing on the utilization of fossil fuels, President Lee said.
KOGAS plans to import 2.8 million tons of shale gas from the United States for the next 20 years. Furthermore, the corporation is now studying a plan to build two or three additional LNG plants in the United States. KOGAS had to write off more than 500 billion won in the fourth quarter of last year as the corporation paid for its mistakes: incurring losses stemming from past failures in overseas resources development projects.
Lee still believes in overseas resources development projects down the road.
Asian countries, including Korea, Japan and Taiwan, import gas at inflated prices, President Lee said. The development of resources is needed to gain greater energy flexibility.
The Korean government plans to liberalize the gas wholesale market after 2020. In this regard, President Lee, a professor of the free market economy for more than 40 years, said he accepts liberalization.
But he warned that gas amounts, to be imported under contracts by 2025, will surpass gas consumption forecasts, and if private companies are allowed to be engaged in direct import, it will disrupt the supply-demand order. He stressed the need for allowing private companies to be able to import gas after scrutinizing exact demand in 2015 or after.
Last June, the government established regimes to implement overseas resources development projects. In accordance with the regimes, KOGAS also worked out an action plan, calling for reducing the debt ratio to less than 300 percent by tweaking investments and improving fundaments to enhance efficiency for investments, he said.
Even before the government announced a plan to restructure overseas resources development projects, Lee said, KOGAS has already begun restructuring with a focus on major assets through the disposing of stakes and asset securitization.
KOGAS saw its debt ratio plunge 60 percentage points as of the end of 2014 compared to the end of 2014 by carrying out debt reduction plans through the readjusting of investment scale and timing, the disposing of non-essential assets, and the expanding of owner’s capital. For instance, the corporation tweaked the size and timing of investments into non-conventional gas fields in North Americas, disposed of a 5 percent stake in an LNG project in Canada and securitized an overland gas pipe project in Myanmar.
A view of KOGAS headquarters in Daegu Metropolitan City. (Photos: KOGAS)