KNOC’s Global Expansion Strategy

Author: 
Kim Byul-hwa
Description: 
Strategy and Industry Research Unit Paper
JEL codes: 
Abstract: 
In June 2008, Koreas state-owned Korea National Oil Corporation (KNOC) announced a global expansion strategy calling for a six-fold increase in oil and gas output and a five-fold increase in proven reserves by 2012. Korea, which depends almost entirely on foreign countries for oil supply, has been developing policies to encourage the development of overseas resources by Korean companies to enhance its energy security. KNOCs expansion is part of these efforts. Korean companies expansion into the upstream sector has featured a package-oriented approach in which they secure resources in foreign countries while supporting the development of energy infrastructure and social overhead capital required in these countries. As the national oil company, KNOC has played a leading role in this global expansion. Key features of KNOCs strategy include the acquisition of production assets rather than exploration assets, M&As of oil companies, the retention of engineers from the merged companies and the improvement of technological levels. If KNOC successfully implements its expansion strategy as planned, Koreas equity oil and gas production is expected to increase. However, a drop in crude oil prices has prompted other Asian national oil companies such as Chinese NOCs to aggressively go out for oil and gas assets. As the competition for securing energy resources intensifies, KNOCs future course remains to be seen, including how it would overcome the future challenges of post-merger integration.