Firms, government open their wallets to power up overseas

Facing higher prices for crude oil and other resources and tighter global competition to secure energy, Korean firms, which depend on resource imports, are now active in foreign energy development and plant construction.
In a recent move, a consortium led by the state-run Korea National Oil Corp. and SK Corp., the nation’s largest oil refiner, will soon sign a final agreement with the Kazakhstan government to drill for oil in the Zhambyl block in the north Caspian Sea, according to the companies. The field is estimated to hold oil reserves of more than 1 billion barrels, more than the average of 800 million barrels that Korea uses in a year.
The deal is part of Korean efforts to reduce dependence on energy from the Middle East.
In November, a consortium led by the state-run oil developer and LG International Corp. completed construction of gas production facilities for the 11-2 mine lot of Vietnam. From that mine, 2,900 tons of liquefied natural gas and 4,200 barrels of crude oil will be produced per day by 2030. The project began in 1992 with exploration and finally began to bear fruit, the Ministry of Commerce, Industry and Energy said.
In July, Korea National Oil took over an oil sands mine in Canada to help diversify Korea’s oil supply and secure a more stable crude oil reserve.
Those recent moves come as nations compete to secure energy, especially China. While Korea National Oil is producing 43,000 barrels of crude oil and gas a day, its Chinese counterpart, China National Petroleum Corp., is producing roughly 3 million barrels of oil and gas a day. In March, Korea National Oil signed a memorandum of understanding with the Chinese rival for cooperation in oil projects and exchanges of technology and information.
The Korean government is promoting foreign energy development projects bundled with construction of power plants and other infrastructure.
For example, Korea signed a $10 billion deal with Nigeria, under which a consortium led by Posco Engineering and Construction and Korea National Oil will modernize Nigeria’s railway, while exploring its oil resources. In exchange for construction of new railways, the consortium will obtain the right to explore Nigerian oil and gas fields.
Other private firms, such as the Doosan Group, are expanding energy-related business overseas. Doosan Heavy Industries & Construction Co. said yesterday it won a $1.2 billion order, its biggest overseas contract ever, to build a coal-fired power plant in India. Doosan Heavy has won more than $4 billion in new contracts this year, more than double what it received in 2006.
Doosan’s machinery affiliate, Doosan Infracore Co., said in March it will take over Collier Technologies, Inc., a U.S. company holding a patent for new hydrogen-blended compressed natural gas technology, for $6.15 million.
Bolstered by these deals, Korea’s total overseas direct investment doubled over 2005 to $18.5 billion in 2006, according to the Finance Ministry. In 2006, the state-run Korea National Oil Corp. invested $410 million for development of natural gas fields in Vietnam.
With the moves, Korea secured 8.8 billion barrels of additional crude oil and gas reserves in 2006 for a 14 billion barrel reserve, the Energy Ministry said.
To support overseas development, the Korean government said it will set up a $100 million private equity fund this year for projects such as power plants.

By Moon So-young Staff Writer [symoon@joongang.co.kr]