SEOUL (Reuters) - Korea National Oil Corp (KNOC) is looking to acquire U.S. shale gas companies or assets as it seeks to secure liquefied natural gas (LNG) supplies to feed rising demand from the fourth-largest economy in Asia.
KNOC KOILC.UL expects to spend an amount similar to what it had set aside last year - $3.4 billion - on overseas oil and gas assets, Vice President Chang Sung-jin said in an interview for the Reuters Global Energy & Environment Summit.
South Korea’s state oil firm also aims to boost output by 80,000 barrels of oil equivalent per day (boepd) to 300,000 boepd by adding new assets by the end of 2012 and raise it to 500,000 boepd by 2017.
“Given the economics and the possibility of bringing LNG in to domestic markets, we are carefully considering acquiring assets or companies to enter the U.S. shale gas sectors,” Chang said, in an emailed response to questions.
“We are also studying the feasibility of entering the Chinese shale gas business.”
South Korea, the world’s No.5 crude oil importer and No.2 LNG buyer, has been boosting overseas resources development as, like its regional peers, it grapples with inflation driven by costlier energy and commodities.
In March, KNOC said a consortium led by private equity firm Apollo Global Management LLC (APO.N), of which it is a part, will buy U.S.-based El Paso Corp’s EP.N oil and gas business for $7.15 billion. Most of South Korea’s oil and gas asset acquisition is led by KNOC.
Vast new sources of shale gas, which have become easier to access with techniques like hydraulic fracturing, have flooded the United States with the fuel and pushed natural gas prices to 10-year lows, leading some producers to ask for permission to export it.
South Korea wants energy firms to supply 35 percent of the country’s combined oil and gas imports from projects they own by 2020, compared with this year’s self-sufficiency target of 20 percent, Chang noted.
KNOC currently produces about 220,000 bpd oil, and has 1.3 billion barrels of reserves, compared with a target of 2 billion barrels of reserves by the end of this year, Chang said.
“The firm is pushing forward with various projects, either by acquiring the asset or buying stakes,” he said. “Some projects are expected to make a visible progress soon.”
Overseas investments may be expensive in the short term due to current high oil prices, Chang said, but added that KNOC was going ahead with its investment plan given the long-term demand growth picture. Returns from such investments are usually spread over five to 20 years, he said.
For overseas investments, KNOC has so far this year raised $1.7 billion via global bonds, and by selling some stakes in the U.S. Ankor offshore oil projects in January.
KNOC plans to secure additional capital via domestic and overseas markets if necessary, Chang added, without elaborating.
“We plan to make a similar level of investment this year to last year. In the mid- and long-term, we plan to continue investment to produce 500,000 bpd by 2017,” Chang said, referring to last year’s overseas oil and gas development investment at about $3.4 billion.
The South Korean economy ministry said last December that over 50 state-run and private domestic firms plan to invest a record-high combined $11.8 billion this year to develop oil and gas resources.
A shale gas task force team had been set up by officials from the ministry, private firms, universities and research institutes to build energy and related business strategies.
The team plans to unveil comprehensive plans, including shale gas development and imports, in late August, according to a ministry statement.
Editing by Manash Goswami and Himani Sarkar