POSCO INTERNATIONAL, under the leadership of CEO Lee Kye-In, is making bold strides to expand its natural gas business in Australia. The company has recently approved a substantial capital increase for its subsidiary, Senex Energy, in partnership with Hancock Energy, signaling a significant acceleration of its production expansion plans in the region.
On March 31, 2024, POSCO INTERNATIONAL's board of directors greenlit the company's participation in a capital increase for Senex Energy. The total investment, shared between POSCO INTERNATIONAL and Hancock Energy, amounts to A$650 million. This investment is aimed at establishing an annual production capacity of 60 petajoules by 2026, which is equivalent to 1.2 million metric tons of LNG.
POSCO INTERNATIONAL, holding a 50.1% stake in Senex Energy, will contribute A$326 to this capital increase. The funds will be primarily used for drilling additional gas production wells and constructing essential gas field production infrastructure, including gas processing facilities and pipelines.
This strategic move is designed to accelerate the company's ambitious plan, first announced in July 2022, to triple its natural gas production. The timing of this expansion is crucial, as the supply of natural gas in eastern Australia is projected to gradually decline. Furthermore, the Australian government's recently released Future Gas Strategy underscores the critical role of natural gas in achieving the country's carbon neutrality goals by 2050, providing additional support for continued development in this sector.
Senex Energy has already secured its market position by signing long-term gas supply contracts with major Australian companies. These include AGL, Australia's largest electricity generation company, as well as BlueScope and Liberty Steel. These contracts, totaling 151 PJ of gas, ensure a stable demand and profitability for Senex Energy's increased production capacity.
Since becoming a subsidiary of POSCO INTERNATIONAL in April 2022, Senex Energy has demonstrated remarkable growth. In 2021, prior to the acquisition, the company produced 19.6 PJ of natural gas and reported an operating profit of AUD 26 million. By 2023, production had increased to 26.9 PJ, with operating profits reaching AUD 58 million (approximately KRW 53 billion), significantly contributing to POSCO INTERNATIONAL's overall performance.
Looking ahead to 2026, when the additional gas production comes online, Senex Energy is projected to generate annual sales exceeding KRW 600 billion. This substantial increase is expected to have a significant positive impact on the parent company's profitability.
Beyond expanding production from existing gas fields, Senex Energy is also focusing on securing additional reserves through exploration activities. In July 2024, the company plans to conduct drilling operations in the Rockybar exploration mine in eastern Australia. Additionally, with its 50% stake in the Range evaluation, Senex Energy is well-positioned to maintain a stable gas business through continuous development even after the current expansion project.
The partnership between POSCO INTERNATIONAL and Hancock, an Australian resource development company, extends beyond Senex Energy. Hancock, which also co-owns the Roy Hill mine with POSCO, has been successfully collaborating with POSCO INTERNATIONAL in various ventures. This partnership was further strengthened when the two companies jointly acquired Senex Energy in 2022.
In a recent development, Hancock executives visited POSCO INTERNATIONAL's office in Songdo last month. During this visit, they met with key executives, including CEO Lee Kye-In, to discuss support for the production expansion investment and explore potential joint investments in energy projects both in Australia and overseas. This meeting underscores the strong trust and collaborative spirit between the two companies.
NYSE: PKX
Price: $75.32
Change: - 0.53%
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