Dr seong hoon kim's presentation slides from the 2010 World National Oil Companies Congress
1. 23 June 201023 June 2010
Korea National Oil CorporationKorea National Oil Corporation
International Strategies of
Korea National Oil Corporation
International Strategies of
Korea National Oil Corporation
Dr. Seong Hoon Kim
Senior Executive Vice President
2. ContentsContents
1. Oil/Gas Situation Overview1. Oil/Gas Situation Overview
2. KNOC E&P Status and Strategies2. KNOC E&P Status and Strategies
3. KNOC Oil Stockpiling Status and Strategies3. KNOC Oil Stockpiling Status and Strategies
5. Concluding Remarks5. Concluding Remarks
4. Vision4. Vision
3. 1. Oil & Gas Situation Overview1. Oil & Gas Situation Overview
4. Oil Price Trends
Oil prices show gradual recovery after a sudden drop due to global
recession
Long term oil price (Dubai)
$75/B
('10.5.18)
Annual Average Price of Oil since 2003 ($/b)
fluctuation
The Second
fluctuation
The First
The crash
in ‘86
The Gulf
Crisis
The crash
in ‘98 The 9.11
Sharp Rise
since 2007
Influx of Speculative Capital
US Dollar Weakness
5. 0
20
40
60
80
100
120
140
160
2000 2001 2002 2003 2004 2005 2006 2007
38
40
42
44
46
48
50
Internal Growth LimitationInternal Growth Limitation1
Almost all giants are already being developed or produced
Substitution effect of reserve volume reduced as number
of newly found oil fields are decreased
2000~2007, RRR 59% decreased59% decreased2000~2008, 55% decreased55% decreased
※ Source : IHS
No of Giants found over 100mbbl reserveNo of Giants found over 100mbbl reserve Annual Production & Reserve ReplacementAnnual Production & Reserve Replacement
0
10
20
30
40
50
60
70
2000 2001 2002 2003 2004 2005 2006 2007 2008
% 100Mbbl
Reserve replacement ratio Annual production increase
World E&P EnvironmentWorld E&P Environment
6. Business Opportunities restrictedBusiness Opportunities restricted2
※ Source : IEEJ
NOC’s possession
70%
Available to access
7%NOC’s holding
6%
Russian holding
17%
Only 7% of reserves available to develop for IOCs owing to ‘Resource
Nationalism’ & Nationalization
※ Worldwide reserve 1.4 Trillion bbl (Including Oil-sand)
World E&P EnvironmentWorld E&P Environment
7. Emerging New Consumers’ upsurgeEmerging New Consumers’ upsurge3
Emerging New Consumers such as China & India upsurge in
energy development market
CNPC acquired 49% stake of MangistauMunaiGaz,
the biggest independent oil company in Kazakhstan (’09.4)
Sinopec acquired Swiss ADDAX for U$9.2 billion (’09. 6)
Sinochem acquired British Emerald Energy for U$870 million
Agreement on U$25 billion loan for Russian pipeline construction (’09. 2)
Singing MOU with Petrobras for U$10 billion finance support (’09.2)
Expand Venezuelan investment fund to U$12 billion
China : 8~10% Economy growth since 1970’s caused consumption increase
Aggressive acquisition by resource diplomacy & economic competence
ONGC acquired Imperial Energy, British independent company for U$2.6 billion(’08. 8)
Announcement of Resource Security Plan by establishing sovereign wealth fund using
foreign exchange reserve
India : Consumption increase by average 7% economy growth for the past 8 years
Acquiring overseas upstream assets to ensure stable resource management
World E&P EnvironmentWorld E&P Environment
8. Dependency on Oil/Gas will remain around 55% in 2030
Oil + Gas = 55%
* Source: EIA, International Energy Outlook(2009.5)
Coal
28%
Renewables
11%
Nuclear
6%
2030
World marketed energy use by fuel type
World Energy Consumption
Liquids
(including Biofuel
32%
Natural Gas
23%
9. Dependency on Oil & Gas in Korea : 56.4%(2008)
*Source: Korea Energy Economics Institute, Energy Statistics, 2008
Oil
41.6%
Natural Gas
14.8%
Coal
27.4%
Nuclear,
Hydraulic, etc.
16.2%
Korea’s Energy Consumption
10. Korea’s Oil Consumption
Oil Consumption : 10th country in the world
1 USA 22.5%
2 China 9.6%
3 Japan 5.6%
4 India 3.4%
5 Russia 3.3%
6 Germany 3.0%
7 Brazil 2.7%
9 Canada 2.6%
10 Korea 2.6%
8 Saudi 2.7%
* Source : BP『Statistical Review of World Energy(2009)』
11. Dependency on Middle East OilDependency on Middle East Oil
Oil Import : 5th country in the world
2006 2007 2008
40%
60%
80%
20%
82.2% 80.7%
86.3%
100%
Middle East Oil
(86.3%)
Other Oil
producing
countries
(13.7%)
2008
Korea
*Source: Korea Energy Economics Institute, Energy Statistics, 2008
12. 2. KNOC E&P Status and Strategies2. KNOC E&P Status and Strategies
13. Role of KNOC
Founded March 1979
Improving
Petroleum
Distribution
Infra-structure
Stockpiling
Petroleum
Developing
Petroleum
Financing &
Technical
Support
Stabilizing Petroleum SupplyStabilizing Petroleum Supply Contributing to the Korean EconomyContributing to the Korean Economy
14. UK Captain
Libya Elephant
4 Inc. SES
2 Inc. Vietnam 15-1
2 Inc. Nigeria 321
3 Inc. Russia West Kamchatka
China Mahwangsan West
5 Inc. USA ANKOR
2 Inc. Uzeckistan Namangan-Chust
Production : 14
Development : 3
Exploration : 28
Azerbaijan Inam
Venezuela Onado
3 Inc. Peru SAVIA-PERU
(Z-2B)
3 Inc. Columbia CPE7
5 Inc. Iraq Bazian
2 Inc. Donghae-1 Gas
2 Inc. Harvest
Central Asia
8
Middle East
11
Russia
3
Asia/Australia
7
America
14
West Africa
2
6 Core Area
5 Inc. Kazakhstan Sumbe
6 Inc. Yemen 70
Overview of KNOC’s Global E&P projects
15. 409
553 524
44.9 43.1
50.0
-
100
200
300
400
500
600
700
800
94 95 96 97 98 99 00 01 02 03 04 05 06 07
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
(mmbbl)
UK Captain
Indonesia SES
Vietnam 15-1
Lybia Elephant
Venezuela Onado
DongHae-1 Gas Field
Vietnam 11-2
Reserve
Production
Canada Blackgold
08
550
46.0
900 60.0
70.0
Yemen Marib
Peru 8Block
Average Growth Rate of Production & Reserves (recent 5years) : 146%, 124%
881
09
M&A or Producing Asset
Acquisition
128.8
(Mbbl/d)
KNOC’s Achievements
16. Active M&A to meet government’s self-sufficiency goal
- Target: 300,000 boepd & 2 Bn bbls in 2012
Acquiring 100~300 million barrel reserve per year
Acquiring technology skill (operating) & experienced staff in a short time
Creating Synergy effect, operating experience, new business opportunities
The merits of M&A
E&P Strategies
M&A strategy for promising oil companiesM&A strategy for promising oil companies1
17. USA
ANKOR
(Mar 08)
Peru
Petro-Tech
(Feb 09)
Canada
Harvest
(Dec 09)
Kazak
Sumbe
(Dec 09)
20082008 20092009
57 mb/d
128 mb/d
Production 124%
550 mil. B
Reserves 60%
1.9%
4.4%
Energy Self-
Sufficiency 132%
Experienced Staffs
1,241
660
KNOC
M&A
543
117
568
1333
1,901
First M&AFirst Acquisition of
Production Asset
Extend Biz in
Central Asia
The Largest- Scale
M&A in Korea
880 mil. B
20082008 20092009 20082008 20092009 20082008 20092009
M&A Experiences & Accomplishments
18. ○ Purchase Price : 1.1 billion USD
○ Interest : KNOC 80%, Samsung 20%
○ Asset Summary
- 5 Fields of the gulf of Mexico
· Reserves (2P) : 79 million boe
· Production : 21 MBOEPD
- Experts for E&P : 117
○ Changed name to ANKOR Energy
(July 2008)
[former Taylor
Energy]
Success Case # 1Success Case # 1 –– ANKOR in U.S.A
Purchased asset of Taylor Of U.S.A (Jan. 2008)
19. ○ Acquisition Price : 900 million USD
○ Closure : February 2009
○ Interest(%) : KNOC 50%, Ecopetrol 50%
○ Asset : 1 Production Block
10 Exploration Blocks
○ Reserves(2p) : 153 MMBOE
○ Prospective Resources : 689 MMBOE
○ Production : 18 M BOEPD
○ Experts for E&P : 688
<Future Plan>
○ Production Increase: 45M BOEPD by 2015
Success Case # 2Success Case # 2 –– Peru SAVIAPeru SAVIA [Former Petro[Former Petro--Tech]Tech]
Production
Exploration
Acquisition of Petro-tech (May. 2009)
20. ○ Acquisition Price : 4.1 billion CAD
○ Asset Summary
- Oil field in Midwest of Canada
Oilsand, CBM Projects
· Reserves(2P): 201 MMBOE
· Production: 50 MBOEPD
- Oil Refinery in East of Canada
· Refining capacity: 120 MBOPD
· Stockpiling: 7 MMBOE
· Petrol Station: 64
- Experts
·E&P 379, Oil-Refining 570
Purchased Harvest Energy of Canada (Dec. 2009)
Success Case # 3Success Case # 3 –– Canada HarvestCanada Harvest
21. ○ Acquisition Price : 335million USD
○ Interest : KNOC 85%, Kazakhstan partner 15%
○ Asset Summary
- 2 Development blocks & 1 Exploration block
in Western Kazakhstan
· Reserves(2P): 58MMBOE
· Risked Prospective Resources: 20MMBOE
· Production increase: 20 MBOPD by 2012
- Experts for E&P : 149
Purchased asset of Sumbe of Kazakhstan(Dec. 2009)
Success Case # 4Success Case # 4 –– KazakhstanKazakhstan SumbeSumbe
22. Oil Projects in Kurdistan Region (Iraq)
- Agreement date : 2008.11.17
- Basic scheme of contract
KRG KNOC
Five oil Blocks
Infra building Projects
- KRG (Kurdistan Regional Government)
grants KNOC participating interests
in five oil exploration blocks
- In return, KNOC provides KRG with
infrastructure construction in the
Kurdistan Region
Korea has Industrial sectors’ strengths attractive to oil producing countries
(ex: Electricity, IT, Plant, Construction etc)→improve infrastructure
Continue to apply this strategy for the future biddings in other regions
Package deal
Developing new business model in producing countries or oil
companies
Developing new business model in producing countries or oil
companies
2
23. Calgary
Edmonton
Athabasca
Peace River
Cold
Lake
Fort McMurray
Long-term R&D plans and organization to develop new energy resource
GTL(Gas to liquid): Building GTL plant(10,000b/d) by 2015
Oil sand: Commercial production by 2012
Gas hydrates: Exploration and R&D stage
100% stake in the Blackgold (oil sand, 250 million barrels) in Alberta, Canada
Construct the full-scale producing facilities from 2010
Produce up to 30,000 barrels per day by 2016
Canada oilsand
Blackgold
oilfield
Diversifying
Diversifying business by non-conventional energy sectorsDiversifying business by non-conventional energy sectors3
24. 3. KNOC’s Oil Stockpiling
Status and Strategies
3. KNOC’s Oil Stockpiling
Status and Strategies
25. Petroleum-
Dependent
Industry Structure
Need
Risk Management
Possibility
of Oil Shock
Promote Petroleum Stockpiling
for Energy Security
60
0
10
20
30
40
50
69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05
The Second
fluctuation The Gulf Crisis
The 9.11
Sharp rise
Introduction to Petroleum Stockpile
27. Government’s plan (141million barrels by 2011) will be achieved with
the help of IJS (40million barrels)
Long-term contract with oil companies to minimize the price fluctuations
Providing facilities
Mutual
benefits
Oil-producing countries
Diversifying Markets
Reinforce the ability to cope with
oil crisis (Emergency purchasing right)
Improve the economics of the oil
storage
Use our facilities as sales hub to
increase the market share in
Northeast Asia
Use oil market trend
(Buy Low & Sell High)
Concept of IJS
Oil Stockpiling Strategies
Expanding International Joint Stockpile (IJS) projectsExpanding International Joint Stockpile (IJS) projects1
28. Improve marketing capabilities on overseas production oil
→ Create new biz opportunities and improve KNOC’s global status
Create synergy effect by connecting both oil trading and overseas
produced oil marketing
Harvest
Indonesia
SESUSA
ANKOR
Expand direct marketing oil fields gradually
3,4232,410530--Black Gold
36,50036,50036,50036,500-Harvest
57,06557,00355,43841,1132,661Total
11,00011,00011,000--
Yeosu
Tankage
817851555--Yemen
883883883--ADA
316393425--Indonesia SES
9731,1151,4131,679-UK Captain
3,1533,8504,1322,9342,661US Ankor
20142013201220112010Category
Marketing Amount (thousand barrels)
Reinforce marketing for crude oil produced in overseas by KNOCReinforce marketing for crude oil produced in overseas by KNOC2
29. The pilot project(4.6million barrels) in Yeosu ready by 2011
The main project(23million barrels) in Ulsan port ready by 2014~2015
Government on-going support necessary on the oil hub project
(Benchmark: Singapore took 10 yrs to complete the construction)
Unlike IJS, providing additional
Services to meet the required
spec of buying countries
Crude Oil
Products
Sakhalin
Canada
U.S
South
America
China
China
Singapore
Middle East,
etc
India
4 countries in NEA (China, Korea, Japan, Taiwan), Future Oil price uncertain
→ demand for oil storage increase
Exporters (Canada, SA, ME, Sakhalin)
Importers (China, India, US)
Storage facilities
in Korea
Becoming the oil distribution hub in Northeast AsiaBecoming the oil distribution hub in Northeast Asia3
30. Collecting and distributing center of petroleum
- located in main transportation route
Hub for logistic activities by refinery, trader, tankage companies
-- producing, supplying, discharging, storing, value added treatinproducing, supplying, discharging, storing, value added treating, tradingg, trading
Supply and Demand: SE Asia, Korea, China, Japan, USA, and etc.
Harbor
Infra
Oil Exchange
Market
Infra for
Financing/
Information
Refinery
TradersTank
Terminal
Oil Hub
* Overview of Oil Hub
31. Crude Oil
Products
Korea
Singapore Market
Focusing on India,
South-East Asia
and West-South Asia
New Market in NEA
Independent Market for
the Pacific Rim inclusive of
China, Japan, USA and Canada
Asia’s possibility to divide into two Oil Markets
ARA
Singapore
Gulf
* Prospective of Asian Oil Hub
33. Production :
50-150 M B/D
Plan: Exploration
Success &
Acquire Assets
Ranking: around 70th
Production: 300 M B/D
By Increase of
Exploration Success
& M&A
Ranking: around 60th
Production: 500 M B/D
Plan: Integrated big oil
company
Ranking: around 40th
Enhance a
competitiveness
Local Major
Global Oil
Company
Future of KNOC
34. 38
World
Ranking
98th
60th
X 5
Production
(1000 b/d)
60
300
X 3
Asset
(Billion U$)
9.4
30
X 4
Reserves
(Billion bbl)
0.6
2
Become
a Regional Oil Major
KNOC’s Targets by 2012
20082008 20122012 20082008 2012201220082008 20122012 20082008 20122012
36. ■ KNOC as a state-owned company responsible for oil/gas supply security
in Korea :
- Needs to increase the investment in upstream
- Needs to contribute to improve physical oil distribution system in the
Far East
- Needs to develop human resources and technical specialties to
achieve KNOC’s mission
■ KNOC will overcome the challenging situation in upstream by :
- Globalizing its own management
- Mutual cooperation with host countries and IOCs
- Enhanced E&P Activities
- Diversified investment in the lines of business
