Mercury incurs 220 billion KRW loss due to reckless loans in halted US shale gas drilling

[Asia Economy Reporter Song Hwajeong] The Export-Import Bank of Korea (KEXIM) loaned approximately 260 billion KRW secured by oil and gas fields of a U.S. shale gas project but failed to recover about 220 billion KRW.

According to the Board of Audit and Inspection on the 30th, KEXIM loaned $217 million (about 260 billion KRW) to Atinum Energy, a company participating in the shale gas project, during 2015-2016, but failed to recover $180 million of the principal and ultimately wrote it off in December 2020.

According to KEXIM’s regular audit report, in June 2015, KEXIM received a loan application of $225 million from Atinum Energy for oil and gas field development projects, approved the loan limit as requested, and disbursed $217 million by February 2016. At that time, KEXIM officials reviewed a technical analysis report commissioned by themselves that estimated the net present value (NPV) based on the reserves of the oil and gas fields at $313 million, but instead of using this figure, they listed the NPV as $491 million, which was calculated by a firm commissioned by Atinum Energy, and submitted it as an agenda item to the expanded credit committee for loan review.

Furthermore, it was confirmed that Company A, a joint venture partner of Atinum Energy, stated in its annual report that "due to the decline in crude oil and gas prices, additional drilling operations for the relevant oil and gas fields are scheduled to be postponed" and "drilling operations were suspended from the second quarter of 2015." KEXIM obtained these documents and was aware of these facts in advance, but did not include them in the expanded credit committee agenda and instead wrote that "the relevant oil and gas fields appear to be continuously developable even during periods of low oil prices."

Ultimately, Atinum Energy failed to repay the principal and interest by the loan maturity date in September 2019, and KEXIM finally wrote off the principal in December 2020.

The Board of Audit and Inspection stated that even if the necessity of the loan at the time was acknowledged, if the report had been properly handled, losses could have been reduced by at least $34 million and up to $95 million. It requested disciplinary action (at least a minor disciplinary action) against two related personnel who excessively estimated the loan limit without reasonable grounds. Although their handling of the work constituted grounds for severe disciplinary action, some responsibility was mitigated according to the opinion of the Active Administration Exemption Advisory Committee.

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