Korea on mission to secure natural resources

POSCO, SK, KNOC leading corporate front for nation’s drive

By Oh Young-jin

Natural resources are integral to national security.

After all, the majority of cars are still powered on gasoline engines and so, without petroleum, cities would turn into a great parking lot of immobile vehicles. Coal-based power plants would be out of action, if the supply is disrupted.

Without a steady stream of mineral supplies, the result could be a throwback to the past. Thus, all countries are competing to secure sources of energy resources.

Especially, China is devouring resources from Africa to Australia so it is a matter of unparalleled priority for Korea to secure its own share to keep its industrial machine going.

Already, the government has prioritized such efforts, calling it “natural resources diplomacy.” Leading the way are POSCO, the Korea National Oil Corp., SK Group and other leading conglomerates.

POSCO

Steel giant POSCO has aggressively expanded its business portfolio in the materials and eco-friendly sectors in a bid to seek new growth engines, and transform itself into a comprehensive materials corporation.

POSCO and its affiliates have worked with institutions from industry, academy and research institutes including the Research Institute of Industrial Source and Technology (RIST) to pursue open innovation ― a paradigm that assumes that firms can and should use external ideas as well as internal ones.

POSCO is also focusing on the production and supply of high-powered, ultra-light basic and innovative materials, which are believed to be a catalyst for green growth.

“POSCO has contributed to the nation’s industrial development with impressive achievements. From now on, POSCO will try to take off in new materials fields,” POSCO Chairman Chung Joon-yang said.

POSCO, which has been promoting its magnesium business since 2002, was selected as the supervising institution for the “Ultra-lightweight Magnesium Material for Transport Planes” business ― one of the 10 plans belonging to the World Premier Material (WPM) project of August 2009.

The WPM plan is government-run with funds totaling 1 trillion won and it aims on fostering the world’s leading materials industry to commercialize and create new materials.

POSCO completed building a magnesium sheet plant in Suncheon, South Jeolla Province, in July 2007 in its bid to tap demand for a metal increasingly used in mobile phones, computers and cameras. The facility that it invested 22.5 billion won in can produce 3,000 tons of magnesium sheets annually.

POSCO’s signed a memorandum of understanding (MOU) with Gangwon Province on the magnesium refinery business in December 2009.

According to the deal, POSCO will build a magnesium refinery plant with an annual production capacity of 10,000 tons in Gangneung, while the province promises to give all the necessary financial and administrative support, including land and road construction.

POSCO will also try with the government to commercialize technologies to extract lithium from sea water.

The firm signed an agreement for the joint project in February last year with the Ministry of Land, Transport and Maritime Affairs and the Korea Institute of Geoscience and Mineral Resources (KIGAM).

POSCO and the ministry will invest 15 billion won and 30 billion won, respectively, until 2014.

POSCO expects to produce 20,000 to 100,000 tons of lithium carbonate in the facility. Korea’s annual demand for the mineral is tallied at some 5,000 tons but the country depends on imports for the complete amount.

In April 2010, POSCO and Kazakhstan’s UKTMP reached an agreement for a joint venture to produce titanium slabs.

The deal says that each side will invest 50 percent to build an industrial pure titanium slab plant in Ust-Kamenogorsk, in the eastern part of Kazakhstan, with construction starting in the latter half of this year for completion in 2012.

POSCO set up POS-HiMetal to tap into ferromanganese manufacturing in September 2009.

KNOC

The Korea National Oil Corp. (KNOC) accounts for a significant portion of oil and gas imports.

It acquired Dana Petroleum of Britain, a bid that is all but unprecedented in the history of Korea’s energy firm takeovers with KNOC CEO Kang Young-won leading the way.

``The deal played a key move in topping 10 percent in the self-sufficiency ratio. We will continue efforts to attain this year’s goal of 13 percent,” Kang said in a recent email interview with The Korea Times

The acquisition of Dana also boosted the bottom line of KNOC in 2010 with the Anyang, Gyeonggi Province-based organization chalking up 2.5 trillion won in sales, up from 1.8 trillion won the previous year. Its operating profit rose from 562.1 billion won in 2009 to 659.4 billion won.

Lately KNOC signed a memorandum of understanding (MOU) with its UAE counterpart Abu Dhabi National Oil under which the former will be able to secure stakes in reserves of more than 1 billion barrels of oil. They are expected to sign a contract, whose value is estimated at around $10 billion.

KNOC will also earn the rights to explore three uncharted areas in Abu Dhabi, whose combined oil reserves are estimated at 570 million barrels, large enough to meet the Korea’s demand for around six months.

SK Group

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.

Chey 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.

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.

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.

SK is also engaged in securing iron ore in Sudeste, Brazil, through 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.