The government has announced the merger of the Korea Gas Corporation (KOGAS) and the Korea National Oil Corporation (KNOC), but the heads of the two organizations have reported that they were not consulted beforehand and have not received any explanation regarding the specific benefits of the merger. Concerns have been raised about the merger proceeding without adequate prior review and shareholder protection measures, especially given the significant debts both companies carry, with KOGAS being a publicly traded entity.
During a National Assembly audit of public resource institutions under the Ministry of Trade, Industry and Energy held at KOGAS headquarters in Daegu on October 19, lawmaker Park Sung-min of the People Power Party criticized the government's unilateral announcement of the merger plan without prior discussion or consultation.
When Park asked KOGAS President Hong Ui-rak whether there had been any prior consultations before the government's announcement on September 3, Hong replied, "I have not heard of any." KNOC President Son Joo-seok also mentioned that he had spoken with a senior official on the morning of September 3.
On September 3, the government revealed its plan to merge KOGAS and KNOC into a new entity tentatively named the Energy Resources Corporation. The aim is to manage energy resources such as oil and gas more effectively and enhance negotiating power with oil-producing countries and global energy companies through economies of scale. However, there are concerns about whether sufficient reviews of the financial health and business structures of the two companies have been conducted during the merger process.
Park pointed out that discussions about a merger took place during the Moon Jae-in administration in 2021, but it was decided to first improve financial conditions and normalize operations before considering a merger in the long term. He noted that the financial issues have only worsened since then.
According to the public institution management information disclosure system Alio, as of the end of last year, KNOC's assets were approximately 19.44 trillion won, while its liabilities reached 21.97 trillion won, resulting in a negative net worth that makes calculating the debt ratio impossible.
KOGAS's debt ratio also stood at 396.6% at the end of last year. Although it improved to about 345.3% in the first half of this year, the debt remains more than three times its equity.
The issue of protecting minority shareholders in KOGAS was also raised. Park questioned, "KNOC is a private company with the government holding all its shares, but KOGAS is publicly traded. What will happen to the property rights of minority shareholders?"
In response, Hong stated, "We must ensure that the value of existing shareholders is not harmed at all," adding that since the government announced the merger, he believes there must be some rationale behind it, although he is not aware of the details as discussions have not yet taken place.
The verification of cost savings and enhanced international negotiating power resulting from the merger also became a point of contention. Park argued that even if the two companies remain separate, they can still engage in joint purchasing, negotiations, and investments, and thus the merger should not proceed without a concrete analysis of its effects.
Hong emphasized the need to clarify the impact of the merger on the national economy and the vision for it, stating, "We need to evaluate how synergies will manifest, but no discussions about such synergies and visions have occurred yet." He expressed hope for future consultations with the government. Son also indicated that he understands the government is pursuing the merger to enhance global competitiveness and strengthen national energy security, but he affirmed that KNOC's role will be thoroughly reviewed in the upcoming roadmap.
When asked by Assemblyman Kim Sung-won whether the heads of the two organizations should clearly state their positions on the merger, both presidents indicated that it is not yet the time for that.
Meanwhile, members of the Korean Gas Corporation branch of the Korean Public Transport Workers' Union held a protest against the merger outside the KOGAS headquarters on the same day.
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.