1. 1Korea National Oil Corporation

2. Bilateral Cooperation Between Russia & Korea for Oil/Gas E&P and Role of KNOC Korea National Oil Corporation

3. 3Korea National Oil Corporation Role of KNOC  Objectives – Guarantee national oil supply securities Exploring and developing oil/gas resources, stockpiling oil/gas in Korea and rationalizing petroleum market distribution system  Brief History – 1979: KNOC established (Pedco) – 1981: The Ulsan Storage terminal completed – 1983: Started to explore Korean continental shelf – 1998: Found first commercially viable gas field in Korea – 1999: Stroke Elephant field in NC174 block, Libya – 2000: Stroke giant oil field in 15-1 offshore block, Vietnam – 2003: First production from Donghae-1 gas field / 15-1 oil field – 2004: First oil from Elephant oil field, Libya

4. 4Korea National Oil Corporation  Business Domain Upstream ◊ E&P operator in domestic continental shelf ◊ Overseas E&P ◊ Running drilling rig  Target: 10% of oil & 30% of gas self- sufficiencyDownstream ◊ Strategic oil stockpile – 100 MMB (2004) → 145 MMB (2008) ◊ Trading oil/gas ◊ Bring up North East Asian oil spot market ◊ Improve petroleum distribution systemSupport ◊ Supply oil information (Petronet) and statistics (KODIS) ◊ Professional and financial support to private upstream players Secure self-sufficient source of supply Ensure stable supply & Marketing Promote oil industry Ensure Petroleum Supply Security

5. 5Korea National Oil Corporation Canada Carson Creek China Go-13 Banko Indonesia James Lime U.S.A  Overseas E&P Projects Map (As of Aug. 2004)

6. 6Korea National Oil Corporation Long term trend of energy-source demands – The status of oil is immutable until 2025+ Oil & Gas = 64% Source: EIA, International Energy Outlook 2004. 4. 19. Share of World Total

7. 7Korea National Oil Corporation Component ratio of energy consumption as of 2003 EnergyWorld (%) Korea (%) 20032020 Oil37.551.044.7 Natural Gas24.311.515.4 Coal25.523.920.1 Nuclear, hydraulic, etc. 12.713.619.8 Source: BP Statistical Review 2003, KEEI

8. 8Korea National Oil Corporation Korea is a big importer & consumer Country Consume (000 b/d) Share (%) Net imports (000 b/d) Dependence on imports (%) USA19,70825.411,91660.7 Japan5,3376.95,41499.8 China5,3627.01,73334.4 Germany2,7093.62,73597.5 Russia2,4693.5-- Korea2,2883.02,235100 India2,0902.81,29062.3 Source: BP Statistical Review 2003, Oil & Gas Journal 4 th biggest importer

9. 9Korea National Oil Corporation Importance of NE Asian Cooperation with Russia in Resources Development  Importance of East Siberia to Korea because: – Less explored or developed yet – Emerged as focused area after Russia opens this region  Economic alliance relationship between Russia and NE Asia – Focal point of investment

10. 10Korea National Oil Corporation Korea’s crude dependency on Middle East  World oil dependency on Middle East crude is 28% presently  It will be increased by 38% by year 2020  Pay more efforts to diversify potential uncertainties of supply disruption in the future

11. 11Korea National Oil Corporation Why East Siberia?  Asian premium issue can be resolved only by balanced regional supply  Troublesome seaborne transportation routes to Korea

12. 12Korea National Oil Corporation KNOC’s Role & Strategy for E&P  KNOC sponsors to form Korean consortium  East Siberia → New core area  Strategy changes Past P/L projects only by KOGAS New More investment for the E&P projects Expand KNOC’s role

13. 13Korea National Oil Corporation Government level cooperation in NE region  G-G alliance → between Russian companies and KNOC  To provide invest inducement means by Russian government  To build sound balanced partnership – Limited to downstream investment  Not only downstream but upstream sectors

14. 14Korea National Oil Corporation Difficulties  Limited information/data in such unexplored area  Local player’s assists are essential (Rosneft, Gazprom, etc.)  Double taxation between central government and local authorities should be soften  Master plan to develop the Eastern Siberia needs to be launched

15. 15Korea National Oil Corporation Conclusion and recommendation  Strategic alliance partnership between national oil companies  More focus on the upstream sector rather than to limit the scale of P/L projects – To confirm potential volume of possible supply from East Siberia  Give priority to real consumer, KNOC

16. 16Korea National Oil Corporation  Russia is the resources-rich country, however it’s less explored and developed  Develop the oil/gas fields as early as possible  Korea has to secure the energy supply sources  Long term national agenda of Korea is to reduce the high dependency on Middle East and to adopt East Siberia resources project

17. 17Korea National Oil Corporation