Gas Gong struggling overseas... Investment recovery rate only 40%

Gas Gong, 18 Trillion Invested in Overseas Projects... Recovery Rate 38.7%
Impact of Non-performing Assets... Indonesia Krungmane Project is Representative
2017 Investment of 64.4 Billion Won... Current Equity Value Around 500 Million Won

Korea Gas Corporation Jeju Liquefied Natural Gas (LNG) Terminal located in Jeju.
[Photo by Asia Economy DB]

[Asia Economy Sejong=Reporters Junhyung Lee and Hyunji Kwon] Korea Gas Corporation (KOGAS) has invested over 13 trillion won in overseas resource development over the past decade but has failed to recover even 40% of the principal amount.

According to data submitted by KOGAS to the office of Roh Yong-ho, a member of the People Power Party, on the 20th, KOGAS invested $9.482 billion (approximately 13.5 trillion won) in overseas projects from 2012 to last year. During the same period, the amount recovered by KOGAS was $3.734 billion (approximately 5.3 trillion won), resulting in a recovery rate of 39.4%. The recovered amount includes profits or dividends earned from the projects as well as proceeds from asset sales.

The situation is similar when looking at the entire period of KOGAS’s overseas projects. From 1996, when KOGAS undertook its first overseas project, until the first half of this year, the amount recovered was $4.852 billion (approximately 6.9 trillion won), which is only 38.7% of the total investment of $12.532 billion. This means that KOGAS invested about 18 trillion won in overseas projects over 26 years but failed to recover even 40% of it.

In contrast, the recovery rate of private companies exceeded 90%. According to the Ministry of Trade, Industry and Energy, the cumulative investment by private companies in overseas oil and gas resource development was $29.36 billion (approximately 41.9 trillion won). The cumulative recovered amount was $27.984 billion (approximately 40 trillion won), resulting in a recovery rate of 95.5%.

President Chae Hee-bong of Korea Gas Corporation answering questions
(Seoul=Yonhap News) Reporter Lee Jung-hoon = On the morning of July 29, at the plenary session of the Industry, Trade, Energy, Small and Medium Enterprises Committee held at the National Assembly, President Chae Hee-bong of Korea Gas Corporation is answering questions from lawmakers. 2022.7.29 [Photo by the National Assembly Press Photographers Group]
uwg806@yna.co.kr
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KOGAS’s performance was not poor from the start. The Oman OLNG project, KOGAS’s first overseas project, is a representative success case. From 1996 to the first half of this year, KOGAS recovered $294 million (approximately 420 billion won) from the Oman OLNG project, which is 147 times the investment amount of $2 million. The Qatar LNG project, which started in 1999, invested $17 million and recovered $1.355 billion, achieving a recovery rate of 7,971%.

However, since the 2000s, when large-scale overseas projects were consecutively undertaken, non-performing assets have increased significantly. The Indonesia Krung Mane project is a representative example. In 2007, KOGAS invested $45 million (approximately 64.4 billion won) to acquire a 15% stake in Indonesia’s Krung Mane. Initially, KOGAS expected 2.25 million tons of resources to be deposited in Krung Mane, but the amount recovered over the past 15 years has been ‘zero.’ KOGAS eventually decided to dispose of the Krung Mane project, but the current value of its stake is only about 500 million won.

KOGAS’s financial structure is also deteriorating. KOGAS’s debt is expected to increase from 34.6 trillion won last year to 45.8 trillion won this year, rising by more than 11 trillion won in one year. The debt ratio will soar from 379% to 437.3%, an increase of 58.3 percentage points. As a result, the interest expense KOGAS must pay this year is 967.3 billion won, which is half of its operating profit (1.9084 trillion won).

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