July 12, 2013 / 9:31 AM / in 5 years

S.Korea reviews overseas oil, gas assets for possible sales -sources

* Oil, gas investments since 2008 in poor profitability -report

* 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 (Reuters) - 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 (www.knoc.co.kr)

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 spokesman.

“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

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