* No plan to expand investment in Kurdish region
* Sees crude term imports from Iraq resuming soon
* Eyes small M&A to add 50-100 million barrels of oil
reserves
(Adds refinery capacity in last para, recasts first quote to
clarify deal)
By Angela Moon and Miyoung Kim
SEOUL, Nov 27 (Reuters) - South Korea's SK Energy will not
raise investment in Iraq's Kurdish region without central
government approval, and expects term crude imports to resume
soon from Baghdad, its president said on Thursday.
SK Energy, a member of a consortium developing the largely
autonomous Kurdish region's Bazian oil field, said it would not
join a separate $2.1 billion oil-for-infrastructure package that
Korea National Oil Corp (KNOC) signed with the Kurdish regional
government in September.
"SK Energy did not participate in the agreement signed by
Kurdish regional government on September 25, 2008 and will not
enter into any agreement in Iraq without the authorisation and
approval of the federal government of Iraq," Yu Jeong-joon, SK's
head of Resources and Chemicals Business, told Reuters in an
interview.
KNOC, which is spearheading Seoul's efforts to acquire
overseas assets, finalised the $2.1 billion deal to develop
eight Kurdistan oil blocks, and in return, offer development
projects to the infrastructure-scarce region.
The state-run firm was seeking consortium members to explore
the new blocks, which would secure crude reserves of 2 billion
barrels.
In November 2007, SK Energy, South Korea's No.1 refiner,
angered the Iraqi government by agreeing to a production-sharing
contract with the Kurdish government for the onshore Bazian oil
field.
In retaliation, Baghdad suspended its term deal with the
refiner of 90,000 barrels of crude per day. SK has been covering
the missing Iraqi volume through spot purchases.
"We are talking with Iraq to resume term deals and expect
imports will resume soon," said Yu, whose oil exploration and
production division doubled profit in the previous quarter on
soaring oil prices and increased output.
E&P BUSINESS
SK Energy, which has 500 million barrels of confirmed oil
and gas reserves in 11 fields spreading to 9 countries, said its
output topped 30,000 barrels of oil equivalent per day (boepd)
this month versus 26,000 averaged in the third-quarter.
The company, which targets doubling oil output to around
60,000 barrels per day next year reaching 70,000 bpd in 2010,
said the business was on track to increase profit contribution
to the overall group as it seeks acquisitions and ramps up oil
fields in Vietnam, Peru and Brazil.
"There'll be no big investments next year but we are
receiving quite a number of requests because of the current
market conditions that have forced distressed companies to sell
off assets," Yu said.
Yu said SK was considering small acquisitions to increase
reserves by between 50 million and 100 million barrels.
"Our petrochemical business will be more challenging in 2009
and 2010 because demand will continue to be weak while new
capacities come on stream from the Middle East," Yu said.
Crude prices have fallen around $100 a barrel in just four
months and the value of by-product naphtha, the cornerstone of
the petrochemical industry, had fallen below the cost of crude,
squeezing margins of most refiners.
SK Energy, which agreed earlier this year to buy a 35
percent stake in a joint naphtha cracking venture with China's
Sinopec, said its investment will be less than initial
expectations.
The market had estimated the joint venture project would
cost around 20 billion yuan ($2.9 billion), but with the two
firms working to minimise costs, the price may be moved down to
below 19 billion yuan, according to industry sources.
The 800,000 tonnes per year (tpy) ethylene project in Wuhan,
in China's Hubei Province, would be the first large-scale
refining and chemical production base in central China.
Operation is expected in 2012.
SK Energy has total crude refining capacity of 1.115 million
barrels per day.
($1=6.829 Yuan)
(Reporting by Angela Moon and Miyoung Kim; Editing by Michael
Urquhart and Jon Loades-Carter)
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