S. Korean state oil corporation buys Peru's Petro-Tech for US$450 mln

By Lee Joon-seung
SEOUL, Feb. 6 (Yonhap) -- South Korea's state-run oil corporation paid US$450
million for a 50 percent stake in a U.S.-owned Peruvian energy company that
currently produces 20,000 barrels of crude and gas per day, the government said
Friday.

The Ministry of Knowledge Economy said the Petro-Tech Peruana S.A. purchase deal
signed in Lima is expected to increase the country's self-sufficiency in crude
oil by 0.3 percentage point to 6 percent of local demand and marks the first time
that Korea National Oil Corp. (KNOC) has taken over an entire oil producing
company.
KNOC's partner, Ecopetrol S.A. of Columbia, also paid $450 million to Offshore
International Group for the other 50 percent stake in the company.
The once wholly state-owned corporation previously bought stakes or took over
individual oil fields from foreign companies. Excluding Petro-Tech, it currently
operates nine overseas operational fields and one domestic one that produce a
combined 50,000 barrels of oil and gas daily.
The ministry in charge of the country's industrial and energy policy said the
purchase could act as an important springboard for South Korea as it tries to
increase its presence in resource-rich Latin America.
The newly acquired company is estimated to rank fifth in terms of oil and gas
produced in Peru and controls roughly 75 percent of the South American country's
offshore oil blocks, including one operational field and 10 under development.
"Because the South Korean oil company owns half of Petro-Tech, it is entitled to
10,000 barrels of oil per day coming from the operational field," said Vice
Knowledge Economy Minister Kim Young-hak.
He added that the operational Block Z-02B covers 2,000 square kilometers, and has
a confirmed reserve of 152.8 million barrels, with production to reach its peak
of 45,000 barrels per day in 2015. The field should be in operation up till 2030.
"Of the 10 remaining blocks, two have undergone detailed seismic surveys that
have shown considerable promise," he said. The 10 potential oil blocks cover
74,216 square kilometers and could hold an additional 689 million barrels of
crude. KNOC-Ecopetrol is expected to start drilling those that have the best
potential.
Kim noted that the two partners will evenly appoint six senior managers to run
the joint operation, with KNOC reserving the right to designate the CEO.
The senior policymaker said the deal is beneficial for KNOC, since it will permit
joint operations with its partners in Columbia, which ranks 38th among the
world's oil producers. It will also allow KNOC to tap the knowhow of the 3,000
employees of Petro-Tech on operating oil fields and managing logistics.
KNOC ranks 95th among oil producers and, because it is a relatively late-starter,
lacks operational knowhow.
The oil corporation said it benefited from the sharp drop in crude oil prices
that caused overall payment for the deal to come down from around $1.8 billion in
April 2008, when Petro-Tech was initially put up for sale.
Without going into details, KNOC said that it generated the necessary funds by
issuing floating rate notes (FRN) overseas. Exact details about interest rates
and due dates of the FRNs have not been disclosed.
The government, meanwhile, said that it is aiming to increase total daily
production of oil produced in fields controlled by South Korean companies by
50,000 barrels per day this year.
Officials said that talks are underway with several foreign companies so that
South Korea can meet this target.
yonngong@yna.co.kr
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