This is the second of a series of article featuring the country’s best public entities, state-run organizations and government-backed corporations picked through surveys among experts. ― ED.
By Kim Tae-gyu
What happens when an emergency in oil-producing countries disrupts the global trade of crude? Korea doesn‘t produce a drop of oil. Could the country support its exporters such as Samsung Electronics and Hyundai Motor?
The Korea National Oil Corp. (KNOC) has been preparing for the worst-case scenario in a war for international resources by building a large-sized oil storage facility to hoard a substantial supply of ``black gold.’’
The Anyang, Gyeonggi Province-based organization said Thursday that the project to build the mega-sized storage facility in Yeosu, approximately 455 kilometers south of Seoul continues as planned.
``The Yeosu storage tanks are intended to provide Korea with leeway in the case of an emergency as they would hold more than 8 million barrels of oil when they are completed early next year,’’ a KNOC official said.
``On a more positive note, we have raised 36 billion won of late to fund most construction costs on our own with minimal borrowing.’’
Originally, such global petroleum giants as Oiltanking and Glencore participated in establishing the Yeosu oil hub together with domestic outfits SK Energy and GS Caltex.
However, the former two dropped out during the global financial crisis in the late 2000s, which generate great doubt whether the project would be completed.
Yet, the exit of Oiltanking and Glencore was a kind of a blessing in disguise.
``We initially thought of taking advantage of project financing to secure funds to set up the oil hub. After Oiltanking and Glencore gave up the project, however, we decided to raise funds on our own,’’ the official said.
``As a result, we saved 32 billion won, which would have been the cost for project financing.’’
Project-financing refers to a way of securing funds for a particular project such as railways, nuclear power stations, toll roads or the construction of infrastructure.
In Korea, the method was mostly used to build big apartment complexes. Banks provide money to build the apartments via non-recourse loans secured by cash flow from the project itself.
Then, the scheme spread to other areas and the oil-hub initiative also adopted it but the problem is that raising funds in this manner requires high payments to brokering outfits such as securities firms or investment banks.
``We aim to make the Yeosu facilities equivalent to Jurong Island in Singapore, the Gulf Coast of the United States and Amsterdam-Rotterdam-Antwerp (ARA) oil hubs,’’ he said.
KNOC will further increase the country’s storage of oil via building facilities in Ulsan with a capacity of 28.4 million barrels.