Koreans go slow and fast in oil sands

South Korea’s state-owned oil company is operating the accelerator and brake at the same time.

Having reined in the startup objectives for its Blackgold oil sands project, Korea National Oil Corp. has also served notice that it plans to enter Alberta government lease auctions, regardless of the premium now being paid to acquire new properties.

KNOC President Doo-Yul Hwang said his company has a long-term vision for Canada, now that it has control of about 300 million barrels of bitumen resources at the Blackgold properties near Cold Lake in northeastern Alberta.

But he made it clear that only assets capable of yielding 150 million barrels will interest KNOC as it tries to bolster South Korea’s energy security to support a heavy manufacturing sector.

Currently South Korea is the world’s fifth-largest oil importer at 2.3 million barrels per day, prompting KNOC to target production of 380,000 bpd by 2013 from places such as Nigeria, the Aral Sea, the Kamchatka Shelf in Eastern Siberia and Alberta.

Hwang said his company views the oil sands as prime development potential, now that oil prices and technology have improved the rate of return.

He is confident that KNOC will “be an expert in the oil sands within 10 years.”

Initially, the company expects to produce 10,000 bpd of bitumen in 2010, doubling by 2013-14 and peaking at 30,000 bpd — well short of an earlier goal of 100,000 bpd by 2015 which has been trimmed because of new environmental regulations.

Hwang also said the time needed to obtain regulatory approvals for a 30,000 bpd are longer than previously anticipated, prompting KNOC to “aim small, acquire experience and then move upward.”

But he was emphatic that KNOC will not be deterred from advancing Blackgold, regardless of environmental costs and the potential for higher royalties or construction costs.

—Gary Park