[Exclusive] 'Selling Again at a Low Price'... Korea National Oil Corporation to Sell US Offshore Oil Field

Purchased for 1 Trillion Won During High Oil Prices 13 Years Ago
Oil Prices Have Fallen Since Purchase, Making Losses Inevitable
Risk of Losing Both Economic Viability and Security Amid Resource War

Korea National Oil Corporation Sells Anchor Offshore Oil Field in the U.S. Gulf of Mexico

[Sejong=Asia Economy Reporter Kwon Haeyoung] Korea National Oil Corporation (KNOC) is selling the Anchor offshore oil field in the U.S. Gulf of Mexico, which it purchased for 1 trillion won in 2008. This move is a measure to reduce the debt that surged due to aggressive overseas asset acquisitions during the MB (President Lee Myung-bak) administration, but the prevailing view is that the sale price will be lower than the purchase price. Recently, as mineral and oil prices have soared and countries weaponize resources, concerns have been raised that both economic feasibility and security might be compromised.

According to industry sources on the 28th, KNOC’s U.S. local subsidiary, Anchor Holdings, has decided to sell its offshore oil field in the Gulf of Mexico and is currently negotiating the sale with overseas companies. After bidding at the end of last year and selecting a preferred negotiation partner earlier this year, detailed sale conditions are now being discussed.

KNOC invested about 1 trillion won in 2008 to acquire an 80% stake in the Gulf of Mexico offshore oil field from the U.S. company Taylor. In 2012, it sold 29% of its 80% stake to domestic private investors. Currently, KNOC holds 51%, while domestic funds and U.S. companies hold 29% and 20% stakes respectively.

Since KNOC is currently in a state of capital erosion, it is rushing to sell its overseas assets. A company official stated, "The sale process is proceeding mainly for assets that are technically unpromising and economically unfeasible, requiring prompt rationalization."

However, the situation has changed as international oil prices recently hit a seven-year high. There are forecasts that prices could rise to 100 dollars early next year. Because of this, there are criticisms that KNOC is rushing the sale to improve its financial structure.

The biggest concern is a fire-sale price. KNOC has invested a total of 898 million dollars in the Anchor offshore oil field so far and recovered 574 million dollars through dividends and domestic stake sales. Calculations show that at least 300 million dollars must be received in the future sale to recover the principal, but the sale price under discussion is reported to be below this amount.

Kang Cheon-gu, an invited professor at Inha University’s Department of Energy Resources Engineering, said, "Resource development is a business that inevitably involves risks as it prepares for the distant future, and even if only one out of ten projects succeeds, it is a so-called 'jackpot.' For Korea to lead the 4th Industrial Revolution, overseas resource development is essential, and resource policies must be completely reestablished with a long-term perspective."