Leap in Overseas Resources Development

As crude oil prices nose-dived below $40 per barrel due to the continued strengthening of the U.S. dollar and fears of a decline in global petroleum demand, some people raise concerns that overseas resources projects might lose steam, leaving Korea at risk of repeating the mistakes of the past: the withdrawal from overseas development projects caused massive losses during the Asian financial crisis of 1998.
However, it is fortunate that despite the current financial crisis, most resources developers are not showing signs of even considering selling stakes in mining blocks or of massively reducing new investments.
The government is striving to continuously push ahead with projects to develop overseas resources in order to make 2009 a year for a leap in overseas resources development by upgrading Korea's own development of energy and natural resources and Korean companies' resources development capabilities.
First of all, the government plans to implement various steps to provide financial support in order to ease constraints facing resources developers. It plans to increase the proportion of its support to the private sector with loans that carry high surcharges only in case of success from 51 percent to 73 percent while raising a 100-billion-won fund in which Korea National Oil Corp. (KNOC) and other resources developers participate. The financial support for exploring resources, being extended by the Export-Import Bank of Korea, will also be expanded.
Second, it sees to it that such resources developers as KNOC and Korea Resources Corp. will go bigger in order to secure world-class competitiveness. Making the most of the current situation in which prospective M&A targets have sprung up due to a drop in crude oil prices, the government is aggressively pushing ahead with plans to carry out takeovers of prospective companies and mining blocks of strategic resources.
Third, the government plans to step up such diplomatic activities in the energy sector as summit trips to resources-rich countries. It will ramp up diplomatic activities designed to ensure collaboration in the energy field by grouping four strategic areas ― Russia, Central Asia, Central and Latin America and Africa ― according to the characteristics of each nation. The president's summit trips or the visits by heads of state will be considered in areas such as Russia and Brazil, in which resources exploration may be connected with industrial collaboration, and Colombia, where foreign investors are given wider investment opportunities. This is designed to create an environment for helping Korean companies land projects and enter markets.
Fourth, it will continue to expand such infrastructure for overseas resources exploration as the cultivation of expert manpower, the development of technology and information management in order to support Korean companies' overseas projects.
The government has designated 10 universities, including Hanyang University and Chonnam National University, as educational institutions designed to promote resources development this past November, with academic courses to open this year. This move is expected to ease to some extent the lack of expert manpower, a problem raised consistently by resources developers. Resources developers join forces in entering foreign markets to acquire advanced technology and promote the sharing of information by building up an overseas resources development information management system.
The government plans to push ahead with resources development policies as suggested in a mid- and long-term perspective despite the financial crisis and the drop in crude oil prices. It will throw its heart and soul into seizing hope and opportunity amid crisis. I'm confident 2009 will be recorded as a year for a leap in overseas resources exploration with our companies' continued investment into overseas resources exploration, coupled with the government's solid support. nw

By Kim Hak-do,
director of the Resources Development Policy Division at the Ministry of Knowledge Economy