Financial Conditions of KNOC and KOGAS Continuing to Deteriorate

The Ministry of Trade, Industry & Energy holds a workshop on March 15 and 16 to discuss how to restructure the Korea National Oil Corporation (KNOC) and the Korea Gas Corporation (KOGAS).

The total debt of the KOGAS amounted to 29.2793 trillion won last year. According to the Ministry of Strategy & Finance, the KOGAS was the third most indebted non-financial state-run enterprise of South Korea, behind the Korea Land & Housing Corporation and the Korea Electric Power Corporation, as of the end of last year although it succeeded in reducing its debt by almost eight trillion won in three years.

In the meantime, the KNOC’s debt ratio is continuing to increase. Specifically, it skyrocketed from 168% to 529% between 2012 and last year. As a result, the total debt of the KNOC amounted to 17.9771 trillion won last year. When it comes to debt ratio, the KNOC is second only to the Korea Resources Corporation among the 41 organizations under the Ministry of Trade, Industry & Energy. Still, the KNOC paid a bonus of 4.98 million won to each of its employees in 2016.

A merger between the KOGAS and the KNOC has been demanded for a while in this regard. Back in May 2016, the Ministry of Trade, Industry & Energy and Deloitte Anjin LLC released a report recommending the establishment of a new corporation through the merger, transfer of the KNOC’s resources development function to the KOGAS, transfer of the KNOC’s petroleum resources development function to the private sector, and the establishment of a new petroleum resources development company. At that time, Deloitte Anjin LLC pointed out that a structural or functional consolidation between the two corporations would lead to a higher level of investment and human resources management efficiency.

KOGAS and KNOC union members are opposed to the merger though. The KOGAS is opposed to it as well, claiming that it cannot handle the KNOC’s poor financial conditions. Discussions on the transfer of the petroleum resources development function to the private sector fizzled out, too. The KNOC president position is currently vacant, exacerbating the already dire situation.