x Abu Dhabi, UAEFriday 19 January 2018

Oil minnow GS Energy has become a player in Abu Dhabi's coveted fields

Until last year GS Energy didn't even exist, and yet the South Korean company has stumbled upon one of the world's most promising hydrocarbon deposits in Abu Dhabi.

JW Eun, the leader of GS Energy's Middle East and Africa team, says GS has shifted its focus to the Middle East. Seong Joon Cho for The National
JW Eun, the leader of GS Energy's Middle East and Africa team, says GS has shifted its focus to the Middle East. Seong Joon Cho for The National

Surrounded by bulgogi restaurants and convenience stores plying rice patties and yogurt, the headquarters of GS - South Korea's eighth-biggest conglomerate by assets - seem somewhat humble.

The lobby is furnished with hard plastic chairs tucked against the walls, and it lacks the flashy LCD screens and demonstration tablets of more ostentatious rivals like Samsung, whose base is down the road in Gangnam, Seoul.

Yet this minnow among South Korea's chaebol, as the nation's family-controlled conglomerates are called, has managed to lay its hand on some of the world's most coveted oilfields in Abu Dhabi.

Last year the company signed an exploration agreement, together with its partner Korea National Oil Corporation (Knoc), for three blocks in the emirate - a landmark deal in a place where the last new country to gain a concession in the emirate was Japan in 1968.

In a matter of months GS Energy, the GS subsidiary that holds the 10 per cent interest in the concession, hopes to start drilling an appraisal well.

Within two years it expects to pump oil from the Haliba field on the Omani border, the best known of the blocks. If they strike lucky, the Korean partners could lead the first shale exploration in the UAE at a separate block believed to be rich in fracking potential.

"Our strategy has shifted from Asia to the Middle East," says JW Eun, the leader of GS Energy's Middle East and Africa team. "We hope to find more business opportunities in either conventional or unconventional [energy] in UAE."

The story of how GS came to partner with one of the world's most renowned and prolific oil producers - alongside ExxonMobil, Total, BP and other majors whose presence draws on Abu Dhabi's history - is an unlikely one.

GS Holdings, as the parent company is called, did not exist until eight years ago when it spun off from LG, another chaebol. (The names come from the original brand, Lucky Goldstar.)

Last year, two months before signing the deal with Abu Dhabi National Oil Company (Adnoc), GS formed its newest subsidiary: GS Energy, an umbrella for its power and oil and gas businesses. Its refining and petrochemicals joint venture GS Caltex is a long-term partnership with Chevron that was also the first private oil company in South Korea.

GS Caltex has been buying Abu Dhabi oil for three decades, helping GS to gain a seat at the table, said Mr Eun.

Support from Knoc, which has a 30 per cent interest, and a government led by the then president Lee Myung-Bak is also seen by analysts as a decisive factor.

"We have a strong relationship with Adnoc, so our company wants to expand our business upstream," Mr Eun said in an interview in Seoul, the base for 150 of GS Energy's employees (Abu Dhabi is home to one).

The company hopes that GS Caltex's downstream experience can help it to "strategically cooperate" with local downstream operators.

This comes as GS tries to shift its focus away from exploration in Cambodia, Indonesia and Thailand, countries that can offer high margins but a higher risk of failure.

Although Abu Dhabi has historically offered slim margins - US$1 a barrel has been the norm for onshore oil exploration for decades - it provides fields with a higher chance of success.

Mr Eun declined to say if GS was bidding for the renewal of Abu Dhabi's lucrative onshore concession, a cluster of fields operated by western majors that produces half the emirate's oil.