As Korea Gas Corporation (KOGAS) and Korea National Oil Corporation (KNOC) are set to merge to establish a tentatively named "Energy Resources Corporation," some in the energy industry say the two institutions are likely to place greater emphasis on stockpiling than on oil and natural gas development going forward. There are also concerns that "resource security" could be at risk if development functions are weakened.
According to the industry on the 12th, the government announced early this month a "plan to push forward public institution function reform" and said it would transfer KNOC's oil stockpiling and oil exploration and development functions to the Energy Resources Corporation.
Currently, KNOC is responsible for domestic and international oil development, oil stockpiling, and improving the oil distribution structure. Among these, oil distribution-related tasks such as budget gas stations will be transferred to the Oil Management Institute, and the remaining tasks will be maintained. The government specified in the integration plan that "KNOC's oil stockpiling and limited oil exploration and development functions will be transferred to the integrated corporation." The government also added the qualifier "small-scale equity investment" regarding oil development by the Energy Resources Corporation.
In the energy industry, based on the qualifiers cited by the government, many believe the Energy Resources Corporation is more likely to focus on stockpiling than on oil and natural gas development in the future. A professor of an energy-related department, who requested anonymity, said, "It would be good if a public corporation led resource development, but KNOC is in a state of complete capital impairment, and KOGAS is a listed public corporation, so if KOGAS aggressively pursues resource development, there could be a breach-of-duty issue," adding, "That is why a conservative method of small-scale equity investment was proposed rather than direct development, and in the end, the emphasis may be placed more on stockpiling than development."
KNOC not only failed to deliver results in past oil exploration or oil development-related mergers and acquisitions (M&A), but ended up only increasing liability. As a result, since 2020 KNOC has been in a state of complete capital impairment, with liability exceeding asset.
On top of that, the fact that KOGAS started not with natural gas development but with the import and distribution of natural gas also supports the possibility of reduced resource development capabilities. Comparing the number of personnel and financial conditions of KNOC and KOGAS, there is a possibility the integration will be centered on KOGAS. In that case, resource imports such as natural gas, which KOGAS originally handled, could be prioritized over resource development.
An energy industry official said, "To properly carry out resource development, you must participate from the exploration stage in areas with development potential," adding, "Given that responsibility was heavily assigned for KNOC's past resource development failures, unless the government sends an active message, resource development at the future Energy Resources Corporation will inevitably proceed passively."
The outlook that natural gas development itself will shrink worldwide is another factor that could sap the Energy Resources Corporation's momentum to pursue resource development. The industry expects the global liquefied natural gas (LNG) market to be reshaped into an oversupplied market over the next four to five years. According to the International Energy Agency (IEA)'s global LNG capacity tracking report, about 254 million tons per year of new LNG export capacity will be added worldwide between 2025 and 2030.
Of course, there is a possibility that LNG demand will increase in tandem with a surge in electricity demand due to the data center construction boom. However, the industry consensus is that in the long run the LNG market is likely to become oversupplied. Bloomberg News previously projected that the global LNG market will enter an oversupply phase starting in 2027, driven by the launch of new liquefaction projects. In 2030, LNG supply is expected to exceed demand by 15 million tons.
If LNG supply becomes excessive, buyers' pricing power will grow, making it more economically advantageous for KOGAS to focus more on imports and stockpiling than on natural gas development.
Additionally, the plan to merge the five power generation public corporations under Korea Electric Power Corporation into "Korea Generation" in Oct. next year is another factor that reduces the momentum to pursue natural gas development. Because LNG purchase volumes will be larger than when each power generation public corporation existed separately, bargaining power in supplier contracts will increase, making it likely that directly imported LNG volumes will further rise.
Directly imported LNG volumes in Korea are already on the rise. According to the Korea Private LNG Industry Association, the share of direct imports in domestic LNG import volumes was 19% in 2021, but rose to 26% in 2025. In terms of volume, during the same period the amount imported by KOGAS fell 8.1% from 37.31 million tons to 34.28 million tons, while LNG directly imported by the private sector and power generation public corporations increased 44.3% from 8.62 million tons to 12.44 million tons.
Shin Hyun-don, a professor in the Department of Energy Resources Engineering at Inha University, said, "The government's mention of only small-scale equity investment in relation to oil development reads as an intention not to carry out direct development as in the past," adding, "The resources that can be secured through equity participation in oil and natural gas development are limited, so it may amount to 'apparent resource security.'"
Lim Jong-se, a professor in the Department of Energy Resources Engineering at Korea Maritime and Ocean University, said, "Because KNOC failed in the process of resource development, there are concerns that the resource development function could be reduced," adding, "It is precisely public institutions that must take on risk and engage in resource development; keeping this in mind, we should not limit resource development methods—such as small-scale equity investment—depending on the nature of the development block, so we can respond to crisis situations like a blockade of the Strait of Hormuz."
However, the government explains that once the Energy Resources Corporation is launched, its larger scale will enhance international bargaining power when carrying out overseas resource development projects. It also says that integrated management of oil and natural gas could enable it to secure a favorable position in overseas block bidding and negotiations.
An official at the Ministry of Trade, Industry and Resources said, "There is no intention to scale back resource development. We are trying to improve efficiency," adding, "KNOC failed to carry out resource development because of liability. The liability will be liquidated by creating a subsidiary."