KNOC, Kazakhstan Will Cooperate on Oil

Korea Building Up Strong Partnership With Central Asian Country

By Kim Tae-gyu

Staff Reporter

Korea will collaborate with Kazakhstan in developing the central Asian country's rich natural resources, especially its all-important oil, dubbed black gold.

The government-run Korea National Oil Corp. (KNOC) signed a memorandum of understanding (MOU) with its Kazak counterpart Kaz Munai Gas (KMG) Thursday in Seoul.

Under the bilateral agreement, the two entities will forge a strategic partnership in order to explore and develop oil fields not only in Kazakhstan but also elsewhere.

``The MOU will help establish a strong and standing network between KMG and us. Over the following year, we will set up a joint committee or other affiliates to mull over specific ways of joining forces,'' KNOC official Chang Sung-jin said.

``Kazakhstan is a place of exponential potential as the country has rich oil fields, the size of which are comparable to those of Middle Eastern states. In addition to this cooperation, we will also be able to tap into other countries together.''

Trust Talks

KNOC first waded into Kazakhstan in 2004 and put forth great efforts to build up trust with the Kazak government and state-run KMG thereafter through a set of joint projects.

After agreeing to co-develop oilfields in the Caspian Sea, KNOC is proactively exploring the oil-rich areas and has already chalked up substantive successes in some attempts.

The most outstanding example is the ADA block where KNOC found oilfields after years of trials, whose contingent resources are estimated at around 91 million barrels.

Pilot production started last year and KNOC plans to extract oil there later this year.

In addition, the Anyang, Gyeonggi Province-based outfit is currently drilling in the Zhambyl submarine block and Yegizkara block along with Kazak agencies and individuals.

KNOC's cutting-edge technologies, such as seismic surveys, also helped in the intensive search of oilfields.

Seismic surveys are geophysical tests geared toward checking properties of specific areas through physical principles including electric, magnetic, thermal and elastic theories.

The cutting-edge technologies are widely employed by oilfield developers, who tend to specify candidate sites to drill after the survey.

``Over the past several years, we have put our top priority on winning the trust of our partners in Kazakhstan through living up to our word against any difficulties,'' Chang said. ``On top of our technological prowess, such efforts have worked to lead to today's MOU.''

Win-Win Formula

KNOC expects the cooperation will benefit both Korea and Kazakhstan.

``We will be able to chalk up a stable source of oil through the joint projects while Kazakhstan will be able to sharpen its competitive edge by learning something from our advanced technologies,'' Chang said.

``In other words, the two-way collaboration is a genuinely win-win partnership. In my view, the relationship will continue to remain good in the future.''

Korea does not produce a drop of oil even though Asia's fourth-largest economy consumes more than 2 million barrels per day.

Hence, it has been touted as one of the most important tasks for the nation to secure stable sources at reasonable prices.

Rocketing oil prices have exposed one of the biggest vulnerabilities of Korea _ when they rise by $25 a barrel, the energy-hungry exporter is required to pay an additional $10 billion per year.

Crude oil prices, which climbed to a record high of around $145 per barrel midway through 2008, plunged to about $40 early 2009 at the peak of the financial distress. However, they have risen since then to move in the vicinity of $85 at the moment.

``One more reason why Kazakhstan picked us as a partner is our experience of racking up fast economic growth as it also hopes to emulate us,'' Chang said.

Indeed, Korea has jumped from being one of the poorest states in the world in the 1950s to a member of the developed economies.

While rocketing from an economic backwater to the front line, the country nurtured a host of international brands such as Samsung Electronics, LG Electronics and Hyundai Motor.

Samsung, whose net profit was more than $1 billion a month during the first quarter of this year, is the world's largest maker of memory chips and flat-panel displays. Its cross-city rival LG Electronics is also a fancied brand across the world.

Hyundai Motor is the world's fourth-largest carmaker, placing ahead of many traditional powerhouses in Europe.

Kazakhstan ― Land of Promise

Kazakhstan is called the second Middle East as far as oil production is concerned. In particular, its Kashagan block situated North of the Caspian Sea is one of the world's five largest oilfields in terms of reserves.

The country is estimated to hold 39.8 billion barrels of oil and 67.4 trillion cubic feet of natural gas.

``Most oil producing countries come up with less than 3 million barrels a day. Only a handful of players, mostly in the Middle East, break the 3 million plateau right away,'' Chang said.

``Kazakhstan is expected to nudge past the mark in the not-too-distant future. In 2015, its daily production is highly likely to surpass the milestone to become one of the most power oil producing countries in the world.''

The country's size is also big enough. It is 12.2-times the size of the Korean Peninsula; yet, its population was just 15.6 million as of the end of 2007, less than a third of that of South Korea.

Many are getting wind of the huge upside potential there. Most international oil companies including Exxon Mobil and AGIP advanced into the land of promise much earlier than KNOC.