Above, Korea’s national flag flies over the Akzhard oilfield to show that it is developed by the Korea National Oil Corp. (KNOC) in Aktobe, Kazakhstan. Below, Korea National Oil Corp.’s facilities of drilling for oil and storing it in Ada, Kazakhstan. / Courtesy of KNOC
By Kim Tae-gyu
AKTOBE, Kazakhstan _ Asked what is the boundary of South Korea’s territory, most people would say that it is the land and nearby islands below the 38th Parallel of the Korean Peninsula.
The Korea National Oil Corp. (KNOC) has a different opinion ― without regard to the location of any specific soil or sea it is Korean territory if a state-run entity digs out natural resources like oil and natural gases for Korea.
``This is our land where oil is produced for us. In a sense, we are expanding our national boundary,’’ KNOC official Lim Jong-pil said who has worked in Kazakhstan for the past two and half a years.
``We have chalked up tangible results here as we started producing oil. We will be able to keep the facilities as our land through the next two decades under a contract with the Kazakhstan government.’’
The oilfields were originally owned by Altius Petroleum International but earlier this year KNOC absorbed the oil developer, which has four oilfields in western Kazakhstan, mostly off the Caspian Sea.
The four combined to produce almost 10,000 barrels a day and 85 percent are exported to other countries to boost the bottom line of KNOC and eventually that of Korea Inc.
The production and sales cost less than $10 per barrel for KNOC while they are sold at up to $90 although the price fluctuates in line with global supply and demand.
Among them, the Akzhar facilities are the biggest as some 7,500 barrels of oils are pumped out per day at 100-plus wells and the amount is expected to go up down the road.
``We have drilled two dozen new wells this year and we will do the same thing next year. Then, the daily production will substantially increase,’’ Altius production manager Alzhan Aizharikov said.
The Anyang, Gyeonggi Province-based KNOC has the rights for the four outfields over differing time spans and it’s midway through 2029 for the Akzhar oilfield.
In other words, Akzhard is Korean territory until then, Lim said.
Milestone achievements in Ada
Kazakhstan is special for KNOC in that it has more than 20 Koreans and hundreds of officials recruited locally since it has developed oilfields here on its own in an area of western Kazakhstan called Ada near Akzhar.
``For a long time, we have attempted to develop oilfields on our own from the very first explorations to the final production and hit the first success in Ada,’’ KNOC Administration Director Sin Yong-hwa said.
``Currently, we only produce oil in Ada for local consumption. But we plan to export it in the near future after obtaining official permission from the Kazakh administration.’’
The Korean consortium comprising of KNOC and LG International holds three fourths of the shares in the Ada project while the remaining fourth is owned by Kazakhstan’s Vertom NV.
The project began in 2005 and KNOC found oil in Ada, whose total reserves are estimated at more than 30 million barrels. Full-scale production is set to start soon and daily production is expected to reach 7,500 barrels in a couple of years.
The global oil industry is composed of two main segments of searching and extracting the precious resource, called the upstream, and refining it for end customers, or the downstream.
Up until now, Korea has been regarded as a downstream behemoth with four large refiners having gained prominence in the international markets with competitive edges in both quality and price.
They are SK Innovation, S-Oil, GS Caltex and Hyundai Oilbank.
In contrast, the country has been a minnow in the upstream segment as they have mostly focused on refining crude instead of finding and extracting it.
KNOC has tried to change this to become an upstream player and one of the major maneuvers was its efforts in Kazakhstan both on land and in the sea.
KNOC has worked on the Zhambyl area in the northern Caspian Sea to find a large amount of oil reserves.
Another large project is the Arystan oilfield in the southwestern part of the country, where KNOC holds a majority of shares. The daily production there is expected to rise as much as 20,000 barrels in the mid 2010s.