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2009/10/22 15:09 KST
(LEAD) S. Korea's state-run oil company buys Canada's Harvest Energy

By Lee Joon-seung
SEOUL, Oct. 22 (Yonhap) -- South Korea's state-run oil company has bought a Canadian energy firm to boost Korea's self-sufficiency in securing the critical resource, officials here said Thursday.

   The Ministry of Knowledge Economy said Korea National Oil Corp. (KNOC) successfully concluded a US$3.95 billion takeover of Calgary-based Harvest Energy, which currently produces 53,400 barrels of crude and gas per day.

   At present, production from oil and gas fields owned or partly controlled by South Korean companies stands at around 188,000 barrels per day. The latest deal raises that figure to 241,400 barrels.

   Harvest has stakes in oil fields, coal beds, methane and oil sand deposits, with operational fields in the provinces of Alberta, Saskatchewan and British Columbia.

   The acquisition is also expected to push up South Korea's self-sufficiency in oil and gas to 8.1 percent of total domestic demand from the current 6.3 percent. Seoul had originally wanted to push up self-sufficiency levels to 7.4 percent by year's end.

   "The purchase is significant since it not only improves self-sufficiency but gives KNOC a firm foothold in North America that can help pave the way for further mergers and acquisitions down the road," Kim Jung-gwan, the deputy minister of energy resources said. Most of the oil developed there will be sold in the local market, although this can be shipped to South Korea in case of an emergency, he added.

   Seoul is pushing to transform the national oil company into a more significant player in the global market and has pledged to inject 4.1 trillion won by 2012 to increase its output capabilities by buying foreign oil companies and investing in fields. Such moves are expected to better insulate the country from sharp fluctuations in international oil prices.

   Besides state money, overseas bond investments by the Export-Import Bank of Korea and the national pension fund are to be sought to expand oil investment.

   The official added that once the Canadian government gives its final consent to the transaction in late December, KNOC plans to make full use of Harvest's 380 oil and gas development-related engineers, who can help the public company expand its exploration and production capabilities. The South Korean company has a short history of oil development, and is chronically short of experienced engineers.

   The ministry, which is in charge of the country's industrial and energy policies, also said the purchase will raise South Korea's total oil and gas reserves from the current 2.80 billion barrels to around 3.02 billion barrels.

   South Korea has only a small oil and gas field in the East Sea, and imported 87 million barrels of crude last year.