South Korea’s state-run Korea National Oil Corp (KNOC) plans to sell its Canadian subsidiary — Harvest Operations Corp. — due to continuing losses.
Calgary-based Harvest has been losing money since KNOC bought it in 2009. The loss jumped from $93 million in 2010 to $728 million last year.
KNOC paid $3.95 billion for Harvest in 2009.
Harvest has an estimated 2 billion barrels of original oil in place on conventional lands, and 1 billion barrels more on oil sands leases.
It operates a medium gravity, sour-crude hydrocracking refinery in Come by Chance, Newfoundland with current crude capacity of 115,000 barrels per stream day.
At the end of 2011 Harvest’s gross proved reserves represented 39% of KNOC’s consolidated petroleum and natural gas reserves and resources.
And Harvest’s petroleum and natural gas production represented 29% of KNOC’s consolidated 2011 petroleum and natural gas production.
The loss-making Harvest has been a drag on KNOC’s financial performance, which reported an $825.7 million loss in the last fiscal year.
KNOC is also disposing of other unprofitable overseas subsidiaries as part of a bigger realignment.
The disposal of overseas assets is a shift away from the direction for the state-run energy sector by Korea’s former president Lee Myung-bak.
Korea’s new president, Park Geun-hye, has urged state-controlled resource companies to enhance accountability.
KNOC’s expensive overseas acquisitions had led to a sharp increase in debt.