* Oil, gas investments since 2008 in poor profitability
* Govt warns of restructuring, but no immediate sales
* Govt expected to reveal asset sales soon - sources
* Overseas resources investment budget down 40 pct this year
By Meeyoung Cho
SEOUL, July 12 South Korea is reviewing its
overseas investments in oil and gas due to poor profitability,
particularly those made in the last five years, which could lead
to asset sales to offset losses, industry and government sources
said on Friday.
Asia's fourth-largest economy is heavily dependent on energy
imports and rapidly expanded overseas investments to develop oil
and gas reserves between 2008 and 2012, as it grappled with
inflation driven by costlier imports.
South Korea is the world's fifth-largest crude oil importer
and second-largest liquefied natural gas buyer.
The National Assembly Budget Office in a statement on
Wednesday revealed poor profitability in overseas investments by
Korea National Oil Corp (KNOC), Korea Gas Corp (KOGAS)
and Korea Resources Corp (KORES).
KNOC acquired U.S. ANKOR Energy in the Gulf of Mexico in
2008, Canada's largest energy company Harvest Operations in 2009
and Dana Petroleum in the UK in 2010 according to its web site
KOGAS acquisitions in the past five years include a stake in
the Gladstone LNG project of Australia, a project in Surgil,
Uzbekistan and Iraq's Zubair project, according to its
"We are reviewing what was invested in the past five years
by state-run firms, and those in losses and low profits need
restructuring...although that does not mean that we will sell
immediately," an energy ministry official said on Friday.
The official, who declined to be identified, did not say
when the review would be completed.
"We heard the government's task force team had completed
reviews on our overseas assets and they will unveil soon how
many assets we should offer for sales, although they won't name
them in public," a source at one of the three state-run firms
told Reuters on Friday. He declined to be identified as he was
not authorised to speak to media.
South Korea's three state firms invested a total of $23.21
billion in 2008-2012, said the assembly statement, causing
debt-to-equity ratios to jump in 2012 against 2007.
In KNOC's case ratios rose from 64.4 percent to 167.5
percent, for KOGAS from 227.9 percent to 385.4 percent, and for
KORES from 103.4 percent to 177.1 percent.
The statement said a net present value (NPV) calculation
showed profitability of KNOC and KOGAS investments since 2008
were in poor shape and the non-listed KNOC was believed to have
lost $1.8 billion in oil reserve development since 2008.
South Korea has since reduced its overseas oil and gas
investments by about 40 percent compared with annual investments
in the past five years, according to government data.
"We came to be more cautious in making overseas investment,
also given less budgets," another industry source said,
referring to a combined of 600 billion won ($534.69 million) of
overseas resources investment budgets this year.
Energy Minister Yoon Sang-jick said in April that South
Korea was now focusing more on the quality of its overseas
resource investments, rather than quantity.
($1 = 1122.1500 Korean won)
(Editing by Michael Perry)