Petroleum and Minerals Corporation Shows No Sign of Debt Escape

Oil Corporation Faces Record-High Debt Ratio
Minerals Corporation Survives with Bond Refinancing Loan

[Asia Economy Reporter Moon Chaeseok] The financial conditions of Korea National Oil Corporation and Korea Minerals Corporation, which underwent restructuring amid controversies over reckless overseas resource development projects during the Lee Myung-bak administration, are worsening. Despite a year of self-help efforts, the Oil Corporation's debt ratio has reportedly increased due to a lack of growth momentum. The Minerals Corporation is surviving through refinancing loans from financial institutions. Although the root cause of this management deterioration lies in government policy failures, criticism is emerging that the government is merely standing by.

According to the Ministry of Trade, Industry and Energy and related public enterprises on the 27th, the Oil Corporation's debt ratio last year reportedly soared even higher than the record high of 2,287.1% in 2018. An official from the Oil Corporation said, "Nothing has been decided yet," but added, "There is a possibility it will exceed 2018." They further stated, "We plan to announce the management performance early next month and report on the self-help efforts made during the one year since the emergency management plan was announced." Yang Soo-young, president of the Oil Corporation, emphasized at a press conference in March last year that the overall debt ratio for 2019 would be reduced to 500%. To this end, self-help measures such as improving financial structure, workforce restructuring, and cost reduction were introduced. However, in a recent phone interview with this publication, he admitted, "Achieving 500% is difficult."

The Oil Corporation stresses that despite various efforts, the decline in oil prices is overwhelming. The Oil Corporation earns 95% of its sales from overseas crude oil production and sales. However, oil prices continue to decline. The average futures price of West Texas Intermediate (WTI) heavy crude fell from $64.9 per barrel in 2018 to $57.04 last year, a decrease of $7.86. Although they secured liquidity of 350 billion won in January by selling part of their stake in a UK gas field, this was not reflected in last year's performance.

The situation is more severe for the Minerals Corporation. According to the 'Foreign Currency Bond Issuance and Maturity Status' of the Minerals Corporation, they issued $425 million in 2017, $500 million in 2018, and $400 million last year. This year's refinancing must be completed by next month, with an issuance amount of $350 million. It has been confirmed that the Minerals Corporation is currently negotiating with Australian financial institutions to prevent this. Moreover, the only momentum for the Minerals Corporation, the integration with the Korea Mining Development Corporation, has effectively fallen through.

The Korea Mining Development Corporation Act, which includes the integration plan for the two organizations, failed to pass the Industry, Trade, and Small and Medium Venture Business Committee on the 20th due to opposition from the opposition party. If the integration bill is not processed within the 20th National Assembly session ending on May 29, it will have to be reintroduced in the 21st National Assembly.

Despite these circumstances, the government has not presented any significant measures. The '6th Basic Plan for Overseas Resource Development,' which was scheduled to be established and announced last year, remains uncertain. The basic plan for overseas resource development is a statutory plan established and promoted every ten years under Article 4 of the Overseas Resource Development Business Act. It includes a stable energy resource supply system and specific overseas business directions. The Ministry of Trade, Industry and Energy has postponed the announcement to the first half of this year.

Experts urge the government to clarify its direction. Professor Emeritus Lee Deok-hwan of Sogang University, specializing in Chemistry and Science Communication, criticized, "It is not the responsibility of a responsible government to shift the burden of increased debt caused by government policy failures onto the corporations to handle on their own."

Meanwhile, although the Oil Corporation has been steadily requesting an increase in capital investment, the Ministry of Trade, Industry and Energy has not disclosed any concrete support plans. A ministry official said, "It is necessary to consult with the Ministry of Economy and Finance regarding how much budget increase is needed and how much budget will be used for which projects in the future."

This content was produced with the assistance of AI translation services.