[Exclusive] Korea and Japan Clash at Indonesian Gas Field...May Lose 'Golden Egg Project' (Comprehensive)

Gas Corporation, Conflict with Mitsubishi at Indonesian Gas Field... Issue Emerged in April
Mitsubishi Extends Business in Indonesian Senoro... Gas Corporation 'Bypassed'
'Cash Cow' with 73 Billion Won Dividends over 4 Years... But Gas Corporation Withdraws
Impact on Indonesian DSLNG Project... Gas Corporation and Mitsubishi Joint Investment

Storage tanks at the Korea Gas Corporation Pyeongtaek Liquefied Natural Gas (LNG) terminal located in Pyeongtaek, Gyeonggi Province. [Photo by Korea Gas Corporation]

[Asia Economy Sejong=Reporters Junhyung Lee and Hyunji Kwon] It has been confirmed that the core factor behind Korea Gas Corporation's decision to withdraw from the Senoro gas field project in Indonesia was the conflict with Japan's Mitsubishi Corporation. The conflict between the two companies arose when Mitsubishi, a joint investor in the gas field, decided to expand the project unilaterally, bypassing Gas Corporation. Concerns are growing that this dispute could spill over into Gas Corporation's other projects in Indonesia.

According to data submitted by Gas Corporation to the office of Representative Yongho Noh of the People Power Party on the 20th, Mitsubishi signed a contract with the Indonesian government in April this year to extend the Senoro project. The Senoro project involves exporting gas extracted from the gas field on Sulawesi Island in northern Indonesia to Korea and Japan. Previously, Gas Corporation partnered with Mitsubishi in 2011 to establish the joint venture 'TEL' and secured a 20% stake in the Senoro gas field. The shareholding ratio in TEL is 49% for Gas Corporation and 51% for Mitsubishi.

The problem is that Mitsubishi signed the contract extension without Gas Corporation's consent. When Gas Corporation partnered with Mitsubishi in 2011 to enter the Senoro project, the initial project period was set until 2027. Any continuation beyond that requires mutual agreement between the two companies. According to the 'Shareholders Agreement' signed between Gas Corporation and Mitsubishi in 2011, decisions such as contract extensions require the approval of shareholders holding more than 90% of shares.

Demand to Share ‘Signing Bonus’

Mitsubishi also notified Gas Corporation to share the signing bonus. The signing bonus is a type of compensation paid by companies that have been allocated exploration rights by resource-rich countries to the local government. The signing bonus for the contract extension of the Senoro gas field amounts to $10,684,000 (approximately 15.2 billion KRW). Considering Gas Corporation's 49% stake in TEL, the signing bonus burden for Gas Corporation is $5,235,000 (approximately 7.5 billion KRW).

Gas Corporation has received dividends totaling about 73 billion KRW from the Senoro gas field over the past four years. However, since trust with Mitsubishi has been broken due to this incident, Gas Corporation has judged that future joint projects will inevitably face difficulties and resolved at the board meeting in June to participate only until the initial project period ends in 2027. Along with this, Gas Corporation is also considering legal action to hold Mitsubishi accountable for this situation.

Concerns Over Disruptions to Other Overseas Projects

There are also concerns that the conflict could spread to Gas Corporation's other overseas projects. Besides the Senoro gas field, Gas Corporation is jointly participating with Mitsubishi in other overseas projects such as Indonesia DSLNG and LNG Canada through consortiums or equity investments.

Attention is focused on the potential impact on the Indonesia DSLNG project, which Gas Corporation and Mitsubishi jointly invested in. Since the trust between Gas Corporation and Mitsubishi has been broken, the DSLNG project could also face setbacks. DSLNG is a project that liquefies gas extracted from the Senoro gas field into liquefied natural gas (LNG), and the joint venture (SLD) holds a 59.9% stake. Moreover, Mitsubishi's stake in SLD is 75%, three times higher than Gas Corporation's 25%, giving Mitsubishi stronger influence than in the Senoro project.

There are calls for Gas Corporation to quickly devise countermeasures. It is pointed out that Gas Corporation should accelerate legal responses and other measures to prevent similar issues in other overseas projects. Representative Noh said, "It is a very serious problem that despite Mitsubishi's breach of the shareholders agreement, Gas Corporation has no practical means to enforce its rights," adding, "Measures are needed for other projects where Mitsubishi, whose trust has been damaged as a business partner, is part of the consortium."

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