[Sponsored Report] Using bonds, oil hub project goes smoothly

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[Sponsored Report] Using bonds, oil hub project goes smoothly

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The Korea National Oil Corporation signs an MOU with Vopak Asia and Vopak Terminals Korea on March 28.


The Oil Hub Yeosu Project, meant to establish an oil hub in Northeast Asia, is going smoothly. Oilhub Korea Yeosu, a subsidiary of Korea National Oil Corporation, has succeeded in raising 360 billion won ($316 million) through corporate bonds.

This project has been 10 years in the making. KNOC signed an MOU with Oiltanking, the world’s second-largest company in oil products and petrochemical product storage, and Glencore, the world top-ranking oil and raw material trading company in September 2007. In November 2008, it established Oilhub Korea Yeosu together with Oiltanking, Glencore, SK Energy and GS Caltex. However, due to the global economic crisis, Oiltanking and Glencore dropped out in March 2011. Yet despite the difficulties, KNOC succeeded in getting China Aviation Oil, Samsung C&T and LG International to become shareholders at the end of last year.

The efforts to put the hub back on track were especially noticeable in fund-raising. Due to the global economic crisis, shareholders demanded higher interest and more assurances. At the same time, Oilhub Korea Yeosu was being pressured to cover the costs of construction. To resolve these issues, the Oilhub consortium issued corporate bonds. At the end of last year with help from Hyundai E&C, the company issued the bonds and was able to end delays over construction costs. And through negotiation with various credit rating agencies, it received a credit rating and so was able to issue nonsecured corporate bonds, the first time this was permitted in Korea for a company not yet operating.

KNOC expects that with the Yeosu project will create 306.6 billion won in value per year on average from 2011 to 2015. By 2015, it expects direct and indirect employment to be up to 1,378.

To establish a Northeast Asia oil hub, KNOC is also supporting the construction of a 9.9 million-barrel storage facility as well as operation of the Ulsan New Port North Port region. In light of these goals, KNOC signed an MOU with the world’s top-ranking oil and chemistry product tank terminal service provider, Vopak, on March 28.

KNOC’s experience in attracting shareholders, engineering, financing and securing clients from the Yeosu project will now become an important starting point for the Ulsan project.

Thus far, the new project has received high marks for its potential because of its strategic location in the Northeast Asian market and accessibility to nearby SK Energy and S-Oil refineries.

KNOC is currently recruiting additional companies to participate in the new business and will confirm the final list of companies that will participate and begin the project by reclaiming the site next year.

By Lee Ji-hyun [concordia@joongang.co.kr]

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