Government to revise the law to expand KNOC’s exploration of oil to boost nation’s self-sufficiency to 35 percent
Korea National Oil Corp. will increase its capital to 13 trillion won, up 3 trillion won, according to the Ministry of Knowledge Economy on March 11, pending the revision of the KNOC Law.
The ministry said the need to increase capital is part of the government plan to continue to focus on the overseas natural resources exploration diplomacy it has been engaged in for the past four years since President Lee Myung-bak came to power.
High-ranking officials at the ministry said the KNOC law has to be revised in order to be able to increase its capital, which it must do to catch up with oil majors engaged in massive oil exploration overseas.
KNOC’s paid-in capital will be increased to 9.735 trillion won by the end of this year after the government increases its investment in the state-run oil company by 771 billion won this year.
The KNOC law should be revised to allow the state-run oil exploration firm to expand its overseas operations from next year and compete with global oil majors to secure oil drilling rights and find oil reserves to supply to domestic oil refineries.
The government has a plan to boost the oil supply self-sufficiency rate to 35 percent by 2020 from 13.7 percent as of the end of 2010 and KNOC should, therefore, increase its capital to help the government achieve its target. The state-run oil company revised its law in January 1999 to increase its capital to 5 trillion won from 3 trillion won, followed by another revision in 2007 to expand it to 10 trillion won.
KNOC was established in 1979 after the two oil crises of the 1970s to secure a stable supply of oil. As the state-run oil company, it carries out energy projects on behalf of the Korean government that private companies cannot perform because of the structural vulnerability of another oil crisis.
Since it had the ability to explore the oil field on its own from the late 80s, it has participated in several oil drilling projects at home and abroad. KNOC succeeded in developing a commercial gas deposit in the Donghae 6-1 gas field and producing natural gas and condensate. It made Korea an oil-producing country.
From the 1990s, the corporation has been actively engaged in overseas oil projects. As of the end of February 2011, it carried out 191 projects in 25 countries. KNOC made itself known worldwide by successfully engaging in production after developing the 15-1 and 11-2 blocks in Vietnam with its own capital and proprietary technologies.
An oil drilling platform in the middle of the sea operated by KNOC.
Under the strategic goal of GREAT KNOC 3020, it scaled up projects to increase daily output to 300,000 barrels and reserve deposits to 2 billion barrels. Since it successfully took over U.S. Ankor in 2008 as well as Peru’s SAVIA PERU, Canada’s Harvest and Kazakhstan’s Sumbe in 2009, and the UK’s Dana in 2010, it has substantially contributed to the country’s self-sufficiency rate increase of oil supply.
KNOC has a storage capacity of 146 million barrels by operating nine petroleum-stockpiling bases around the nation, enabling it to respond effectively to significant shifts in oil supply and demand. Its ability to operate stockpiling bases resulted in successful international joint stockpiles and makes Korea Northeast Asia’s center for oil logistics, which will be a new growth engine for Korea.
Furthermore, KNOC is securing next generation energy sources by doing extensive activities such as exploring the polar regions, remote areas, and deep seas, and conducting research on oil sands, a non-traditional petroleum. It is also providing timely information on oil prices and national energy policies to the citizenry through an oil information network called Petronet (www.petronet.co.kr), a comprehensive gas station information system (www.opinet.co.kr), and publications.