doomed imo, page-40

korea needs more energy reserves If KNOC were willing to pay a US$485 Mil signature bonus for 2 oilfields in Nigeria ( a country with high sovereign risk) 10 mil for the concession in Puntland must be chicken feed.


QUOTE


- S KOREA SHORING UP ITS ENERGY RESOURCE BASE
909 words
1 June 2006
Asia Pulse
English
© 2006 Asia Pulse Pty Limited
(Analysis from Asia Today, Australia's regional business magazine. Contact: asiatoday(at)asiatoday.com.au)

SEOUL, June 1 Asia Pulse - The continuing surge of the Korean won against the US dollar has resulted in higher export prices and a concomitant fall in exports. Ordinarily, Korean manufacturers and consumers could take at least some comfort in declining import factor prices (cheaper imported commodities and goods), but in the case of oil and gas, price increases have offset such theoretical gains.

Korea's imported fuel costs rose in both absolute and value terms, according to statistics provided by KNOC, the Korea National Oil Company's Petronet information service. February recorded a 6.8 per cent increase from the previous month to reach 75.1 million barrels of crude oil. In the same period, the price per barrel increased by US$1.61 to US$60.02, having climbed US$19.08 since February 2005.

As a result of increases in both quantity and price, the value of Korea's crude oil imports ballooned 56.6 per cent for February 2006 compared to February 2005 to US$4.5 billion, a record according to Korea's Ministry of Commerce, Industry and Energy (MOCIE). Total energy import costs surged 33 per cent in 2005 to reach US$260 billion, one quarter of Korea's total imports by value.

However, part of that ballooning effect may be attributed to increased insurance and freight costs as the dollar values were given on a CIF basis and the previous year witnessed a shift in crude oil sources from Asia to Persian Gulf and African producers. From February 2005 to February 2006, imports from Kuwait, Iran, Qatar and Africa rose 84.1 per cent, 32.2 per cent, 24.8 per cent and 46.2 per cent respectively; imports from Asia declined 32.2 per cent to eight million barrels.

Korea's primary energy demand is expected to rise by an average of 2.8 per cent annually through to 2010, from 229.6 million tonnes oil equivalent (TOE) in 2005 to 263.7 million, an aggregate increase of 14 per cent, according to projections by the Korea Energy Economics Institute (KEEI), even though oil consumption by all sectors except transportation and energy has declined since February 2005.

Coal consumption is expected to rise 4.4 per cent per year on average through to 2010, but considerably more in 2007-2008 as more power generation capacity comes online. Oil consumption is projected to rise by just 0.9-1 per cent. Of Korea's total primary energy consumption, oil is expected to decline to 40.3 per cent in 2010, with coal and LNG to account for 25.8 per cent and 14.8 per cent respectively.

Despite Korea's steadily-declining relative dependence on oil consumption, which reached its peak of 63 per cent back in 1994, KNOC has been aggressively pursuing oil exploration projects in Africa and Asia as part of its goal to make Korea 10 per cent energy independent by 2008 through domestic and international exploration and production.

During Korean President Roh Mu-hyun's nine-day visit to Africa in early March, he witnessed a Korean consortium comprising KNOC, Korean Electric Power Company (KEPCO), Korea Gas Company (KOGAS) and POSCO Engineering and Construction Company sign a US$6 billion agreement with the Nigerian National Petroleum Company (NNPC) involving development of two offshore oil fields, a 1,200- km Niger Delta-Abuja gas pipeline and power plants capable of generating 2,250 MW.
The offshore oil field project involves a production- sharing contract between NNPC and KNOC, where KNOC paid a US$485 million signature bonus for a 60 per cent share in two highly-promising oil fields (the British Virgin Islands-based Equator Exploration Ltd. and local Nigerians were allocated 30 per cent and 10 per cent respectively). The two blocks, about 80 km southwest of Nigeria, hold an estimated 1.5-3.6 billion barrels of recoverable reserves.
Uzbekistan, home to 200,000 ethnic Koreans since their exile by Stalin, has also attracted KNOC investment. During Uzbek President Islam Karimov's fourth visit to Korea (March 28- 30), KNOC and KOGAS signed an MoU with Uzbeknefgas that granted the Korean oil and gas firms exclusive rights to explore two oil and two gas fields and develop them should the fields prove economically viable. The Eastern Uzbek oilfields of Chust-Pap and Namangen- Terachi are believed to have 385 and 435 million barrels of crude respectively, while the gas fields of Surgil and Uzunkui are estimated at 84 and 191 million tons of LNG respectively. Should development prove feasible, production contracts will be signed in December.

Closer to home, KNOC has discovered Korea's second gas field in the East Sea 60 km southwest of Ulsan. The field, Korae-8, located five km southwest of Donghae-1, the first gas field, has reserves of 800,000 tons of LNG, twice the estimated reserves of Donghae-1. Korae-8 is expected to come into production mid-2007. However, the two fields combined will only meet 3.3 per cent of annual gas consumption in Korea, which is the world's second-biggest importer of LNG.

At this rate, Korea's target of reaching 10 per cent energy independence by 2008 will require more international partnerships such as those undertaken recently in Nigeria and Uzbekistan.
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