South Korean energy companies are readying to expand business operations in the U.S. in a bid to leverage on Donald Trump’s pledge to pursue an "America first" energy policy and do away with "job-killing" regulations on oil and coal industries.
Their expansion campaign also has the support of the Korean government encouraging energy imports from the U.S. to narrow trade deficit with the country before the incoming Trump administration finds fault with it.
According to sources on Tuesday, SK Innovation promoted the status of its Houston branch office to the headquarters for its E&P (Exploration & Production) business early this year. Its expanded role will include strategy, planning and finance. Its counterpart office in Seoul will be responsible for only legal and tax affairs. A team led by Choi Dong-soo, Director of E&P Planning & Support Team at SK innovation, was dispatched to the U.S. site early this year. They will work on a permanent base at the American headquarters from February.
The company believes there will be more opportunities for its business in the U.S. especially under presidency of Trump. Shale gas development in the U.S. is reignited, for example, and the company expects this situation will create more M&A opportunities. Payrolls at its U.S. E&P team will increase from 40 to 70, according to the company’s plan.
Imports of crude oil and shale gas from the U.S. have risen sharply. Last year, GS Caltex Corporation, Korea’s second-largest oil refiner, imported 2 million barrels of US Eagle Ford Crude, one of the shale oil types produced in Eagle Ford, Texas, marking the first time that a Korean firm has imported crude oil from the U.S. since a 41-year embargo was lifted. The U.S. banned shipment of crude oil in 1975 after the global oil crisis in 1973.
SK Innovation Co. and Hyundai Oilbank Co. are positively considering importing crude oil from the U.S. as shipment costs decreased slightly after the expansion of the Panama Canal. It will be worth buying American oil when shipment costs are lower by $6 to $7 per barrel, the refiners said.
Korean LNG suppliers, too, are active in importing shale gas from the U.S. State-run Korea Gas Corporation already sealed a long-term contract to import 2.8 million tons of American shale gas each year over the next 20 years. SK E&S and GS EPS will import American shale gas of 2 million tons and 600,000 tons, respectively, from 2019. The two will use the gas to run their own power plants. Besides its long-term import contract, SK E&S imported about 60,000 tons of shale gas early this year for its energy subsidiary and additional import will be determined if necessary, the company said.
By Jung Wook
[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]