South Korea, which imports almost all its energy and mineral needs, plans to invest 5.2 trillion won, or US$5.6 billion, developing oil fields and mines overseas to secure supplies amid rising prices and competition.
Asia’s third-largest economy will make the investment by 2011, the Ministry of Commerce, Industry and Energy said Monday in an e-mailed statement. The spending includes money for state-run companies such as Korea Resources and Korea National Oil as well as government loans to private companies.
South Korea is increasing overseas investment in resources as prices surge and competition from China and Japan intensifies. China, the world’s biggest consumer of coal, copper and iron ore, said in January that it may use its US$1 trillion foreign exchange reserves to buy “strategic” resources.
“It’s positive that the government is making large investments, but they should have done it earlier, before prices rose so much,” said Shin Yoon Shik, a metals analyst at Meritz Securities in Seoul.
Crude oil prices have almost tripled since 2001, reaching a record US$78.40 a barrel in July last year. Prices for copper on the London Metal Exchange have jumped more than fourfold in the past five years.
Korea Resources, the nation’s state-run resource explorer, wants to build up stakes in overseas mineral projects to the equivalent to 40% of domestic demand by 2020 and will spend 1.6 trillion won to achieve this, the ministry said Monday. Separately, the company said it plans to start buying strategic metals such as chrome, molybdenum and palladium for a stockpile that will cost 175.5 billion won over the next 10 years.
South Korean companies may boost investments in overseas oil, gas and minerals this year by 81% to a record US$3.8 billion, the ministry said in March.
On Monday, the government will suggest an initial accord with Iran to develop the Middle Eastern country’s oil and gas fields, the ministry said in a separate statement.
Dubai “crude oil prices have recently surpassed the US$65 mark and uranium prices have risen 10-fold, causing concerns of a possible crisis regarding energy demand and supply,” Lee Jae Hoon, vice minister at the Ministry of Commerce, said in the Monday statement. The government “will actively support investment in overseas resources to overcome these concerns.”
SK Corp and Korea National Oil are among South Korean companies that will invest in a total of 140 projects in 37 countries this year, the ministry said in March. Korea Resources is participating in 19 projects in eight countries.
The targets include coal, gold and copper projects in countries such as Australia, Indonesia and China, the ministry said in December. Companies also plan ventures in Kazakhstan, Russia and Burma.
China has already been stockpiling oil, and ministers have said that the country will also build up reserves of other metals, without giving details. China has completed a 3.7 billion yuan, or US$479 million, oil-storage tank in Zhenhai, and more tanks are under construction in Zhousan, Qingdao and Dalian. The facilities are set to be completed in 2008.
Finance minister Jin Renqing said March 9 that the government plans to set up an agency to help manage its reserves that will be modeled on Singapore’s Temasek Holdings, a state-managed company that holds stakes in local and overseas companies. The Chinese agency will manage at least US$200 billion, Yu Yongding, an adviser to the People’s Bank of China, has said.