SK invests 113.8 billion won in North American G&P company

SK invests 113.8 billion won in North American G&P company. September. 27, 2017 07:52. by Sung-Gyu Kim sunggyu@donga.com.

SK Holdings, the holding company of SK Group, enters the shale gas gathering and processing (G&P) business in the United States.

SK Holdings on Tuesday announced that it “decided to invest over 100 million dollars (around 113.8 billion won) in Eureka Midstream Holdings, a G&P company based in North America. SK Holdings, through its U.S. corporation Plutus Capital, will sign a stock purchase agreement on this Wednesday.”

Such investment is part of SK Group’s efforts to strengthen its midstream capacity of the global natural gas business, which is lauded as one of new growth engines in the future. The Korean energy and telecom conglomerate also expects to produce synergy effects with existing energy projects and to expand its business further. The amount of Eureka Midstream’s shares to be owned by SK Holdings has not been disclosed.

In the natural gas industry, gathering refers to the aggregating of natural gas produced from gas wells through pipelines, and processing means cleaning raw natural gas by removing impurities and thereby making the gas suitable to be consumed by end-users.

Eureka Midstream is a G&P company, which operates in Pennsylvania’s Marcellus and Ohio’s Utica, where the North America’s largest natural gas reservoirs are situated. The company owns pipelines capable of transporting 17 million tons of natural gas per year. It also holds long-term contracts that spans more than 10 years on average, and even has an exclusive right to process gas produced in certain areas, which is why the company is considered to have the high level of business stability.

Eureka Midstream was established in 2012 as a subsidiary of Blue Ridge, a U.S.-based resource production company, and in 2014, Morgan Stanley Infrastructure took over the management right. With the purchase of shares, SK Group can now strengthen the whole value chain encompassing the development, transport and supply of natural gas in the United States. The value chain of natural gas is divided into upstream, midstream and downstream, which represent mining, transport & processing and supply & sales, respectively.

SK Group Chey Tae-won has been aggressive in making bold investments this year as evidenced by his decision to invest 3 trillion won in China alone and joining the global competition to acquire Toshiba’s memory chip business.