Yang Su-yeong, president of KNOC, inspects the moves of stockpiled oil at the Pyeongtaek Base.

The Korea National Oil Corporation (KNOC) announced in April that it will purchase 490,000 barrels of crude oil and 150,000 barrels of diesel oil this year with a budget of 31.4 billion won.

According to the plan, the KNOC initially planned to purchase 360,000 barrels of oil in 2020, bringing its stockpile to 170 million barrels of oil by 2025. However, considering recent low oil prices, it increased that 1.8-fold to 64 million barrels, and decided to purchase it early.

As of the end of last year, its oil stockpile stood at 96.5 million barrels, or 95.8 percent of the target. As a result, the KNOC held a bid for some volume in early April and plans to hold additional bids for the remaining volume at an appropriate time in the future, taking into account international oil prices.

In addition, the corporation is going ahead with a lease of oil stockpile space to help Korean refiners address the problem of storage facility shortages.

“The KNOC expects that an early purchase of oil reserves will help boost Korea’s energy security by securing oil reserves at the largest level in an era of low oil prices,” a KNOC official said.

In the meantime, the KNOC succeeded in issuing corporate bonds in the Swiss bond market in early April. This means that the KNOC overcame uncertainties in the financial market sparked by the spread by the novel coronavirus crisis.

Much attention has been paid to whether or not it marks a new beginning for Korean companies’ ability to secure financing overseas, which has been suspended for more than one month due to the spread of the plague.

According to sources in the investment bank (IB) industry on April 5, the KNOC issued 200 million Swiss francs in bonds in the Swiss bond market on April 3 (local time).

The bonds’ maturity is five years, and the issuance interest rate is a fixed rate of 0.875 percent per year. This is about 140bp added to a 5-year mid-swap. Due to excessive market demand, the issue amount originally planned to be 150 million Swiss francs, has been revised up by 33 percent, the KNOC explained.

Previously, the KNOC suggested a spread of 140bp to local investors in Switzerland in forecasting demand for issuance. That is to say, the issuance was realized at an interest rate desired by the KNOC.

This issuance of foreign currency bonds was meaningful in that the overseas Korean paper market has been reopened, some experts think.

As the COVID-19 crisis gripped the world, Korean companies had a hard time issuing foreign currency bonds. At the end of February, the Korea Resources Corporation tried to issue kangaroo bonds of up to 300 million Australian dollars, but delayed its investment forecast due to a contraction in investment sentiment among local institutional investors.

Since then, no company has issued Korean papers in the Asian, European, or U.S. markets furthermore, KNOC officials shared their know-how in anti-COVID-19 activities in a videoconference with COVID-19 crisis management personnel of Colombia's state-run oil company Ecopetrol.

Five members of Ecopetrol, including Ecopetrol Vice President Jaramilo HSE, in charge of coping with the novel coronavirus crisis, three employees of a joint venture between the KNOC and Ecopetrol in Peru, and KNOC officials participated in the videoconferencing meeting in early April at the request of Ecopetrol.

Since then, the KNOC has being providing Ecopetrol with know-how in preventing the spread of the epidemic including the current status and composition of the KNOC’s anti-COVID-19 response organization, information on quarantine activities at oil stockpiling bases and a gas field platform in the East Sea, how to secure quarantine items and major measures by response stages.

A view of Korea National Oil Corp. headquarters in Ulsan. (Photos: KNOC)