MB's 'energy diplomacy' comes under scrutiny
Korea National Oil Corporation (KNOC) CEO Suh Moon-kyu drinks a cup of water while testifying about overseas energy development projects at the National Assembly in Yeouido, Seoul, Thursday. / Yonhap
By Kim Hyo-jin
Opposition lawmakers continue to criticize former President Lee Myung-bak’s “energy diplomacy,” focusing on the losses caused by the acquisition of Canadian oil company Harvest Operations and its debt-ridden affiliate NARL.
Rep. Jeon Jeong-hee of the main opposition New Politics Alliance for Democracy argues that the state-run Korea National Oil Corporation (KNOC) purchased the oil company and its affiliate even though it knew they were not worth the cost.
“Then KNOC CEO Kang Young-won took over the refinery a day after GS Caltex reported to KNOC it had low efficiency after carrying out an asset valuation,” Jeon said during a hearing which started Thursday.
“According to the Board of Audit and Inspection, the KNOC even distorted GS Caltex’s initial review as if it was a final one during its meeting of the board of directors.”
She also criticized KNOC for rushing into purchasing the oil refinery under the previous government’s pressure to raise the independent energy development ratio.
The ratio ― the amount of oil and gas produced by Korean companies pursuant to the amount of their domestic consumption ― is an index that reflects how independently a country secures its energy.
Encouraged by the Lee Myung-bak administration’s focus on natural resources, the state-run KNOC acquired the Canadian oil producer and its affiliate NARL for 4.55 trillion won ($4.1 billion) in 2009. NARL was part of the package in the deal.
As the NARL plant saw a mounting net loss each year, KNOC sold it off for 100 billion won ($93.6 million) to the U.S.-based investment advisory firm SilverRange Financial Partners in August, causing losses of 2.5 trillion won for the nation.
Incumbent KNOC CEO Suh Moon-kyu appeared at the hearing and was apologetic about the loss caused by the acquisition of NARL.
“I admit that NARL took a huge blow to the budget. I apologize to the public,” Suh said. “However, I believe we can make up for the financial loss in the long-term.”
However, the incumbent CEO failed to answer many questions regarding the project that took place during the former CEO’s term.
Opposition lawmakers expressed concerns, saying this is why they requested people directly involved in the Lee administration’s resource diplomacy initiative at the hearing.
Meanwhile, ruling party members worried that the accusations related to a particular project may tarnish the image of resource diplomacy. “The negative view on resource development could diminish investment of private firms,” said Rep. Kim Tae-heum of the Saenuri Party.
Also, they denied opposition party’s accusation that Strategy and Finance Minister Choi Kyung-hwan was involved in the project, saying the KNOC CEO proved that he did not get approval for the project from Choi beforehand.
The hearing on people and organizations involved in the Lee Myung-bak’s resource initiative is scheduled to continue until Feb. 25.
State-run companies, including Korea Resources, Coal, Gas, and Electricity Corporation, BAI, Finance and Foreign Ministry will also appear at the hearings.