SK sets pace to secure resources

SK Group Chairman Chey Tae-won makes it a rule to visit places where there are natural resources to tap such as South America, the Middle East or anywhere else, irrespective of distance.

His globe-trotting endeavor is not just to boost the bottom line of his energy business but, more broadly, for the nation’s energy security, company officials say.

As a matter of fact, Chey chose as his management priority for this year “making the country resources-rich.”

Matching his words with actions, he visited a rubber factory of SK Networks in the hinterland of Indonesia in April. His trip involved an airplane flight, two chopper rides and a jeep trip through thick rainforest, the officials said.

“It was Chairman Chey’s show of determination to stay close to where the action is, in this case, the site where rubber is harvested,” an official said. “The area is infested with malaria and other indigenous diseases. It was quite a risk for the chairman but the employees were happy to see their boss show concern for them.”

The location of the rubber plant in question is on a 60-year lease for development and use thanks to a contract signed in March 2009 between SK and the Indonesian government. Under the contract, SK is planting rubber trees for harvesting later. Already, 20 percent of the lot set aside has been planted. By 2013, an additional 5.8 million trees will be planted.

As hinted at through its Indonesian operations, Chey’s business has a unique model for overseas resources development, which brings mutual benefits to the host country and SK.

In what the conglomerate calls a win-win strategy, SK helps beef up the infrastructure of the host country ranging from its heavy industry such as energy and petrochemicals to information technology (IT) knowhow and construction. In return, SK gains access to natural resources.

Another example of Chey’s win-win model, according to officials, is a liquid natural gas (LNG) facility in Peru that can produce 4.4 million tons annually.

The complex involves SK, U.S.-based Hunt Oil, Repsol-YRF of Spain and Japan’s Marubeni as stakeholders and will cost $3.8 billion over the next seven years.

The facility serves as a base to liquefy natural gas produced in areas SK operates in Peru. The host country receives capital and technology for its overall economic development.

Chey’s model goes one step further from SK’s go-vertical strategy, tying up all petrochemical-related industries from oil to textiles, enabling the all-in-one operation from petroleum production to exports.

SK is also engaged in securing iron ore in Sudeste, Brazil, by its affiliate SK Networks, investing $700 million for a stake in iron ore-producing MMX, an arm of energy conglomerate EBX. The deal will eventually provide Korea with 9 million tons of iron ore annually for 20 years.

SK and EBX are seeking to cooperate in areas such as construction of access facilities, pipelines and power plants as well as shipping, among others.

“This energy development business model will be the key to SK’s future,” an official said.