An Asian country with large, government-backed energy companies seeks growth through cross-border acquisitions. It's inexperienced in such deals however, and gets off to a shaky start.

Can it succeed overseas?

The story may sound all too familiar, but it's not China we're talking about.

South Korea, the world's fifth-largest crude and second-largest liquefied natural gas buyer, has been seeking ways to sharpen its competitive edge. One is by securing foreign oil and gas reserves.

These efforts were put on hold earlier this year when the markets were down but the plans are now back on the burner.

South Korea's energy companies face plenty of obstacles overseas, including money, government meddling and China.

But investment bankers and industry sources say it's only a matter of time before the country's private and state-backed energy majors become a presence in the global M&A game. Wishful thinking? Perhaps not.

They're limited in the way they can grow in Korea, said a Seoul-based investment banker, referring to the country's energy companies. They do actually have a strategy to make overseas acquisitions, or at least attempt to.

Bank of America (BAC.N)-Merrill Lynch has been working with state-run Korea National Oil Corp (KNOC) on its cross-border M&A strategy. Credit Suisse is working with another government group, Korea Resources Corp, sources familiar with the matter say. KORES, as it's known, said last year it plans to increase the amount of coal, uranium, steel and zinc it produces.

Korea Gas Corp, the country's largest importer and sole wholesaler of LNG, has sought help from foreign banks, one of the sources said.

The overseas ambitions are both large and small. Korea Electric Power Corp, the country's state-run power monopoly, said on Thursday it is buying a 1.5 percent in Indonesia's Adaro Energy for $56.5 million.

ROOKIE STATUS

KNOC showed that even though its relatively new to overseas M&A, it's willing to buy big. Sources say KNOC pursued a bid for Swiss oil explorer Addax Petroleum Corp. but was trumped by China's Sinopec. Sinopec, China's largest oil refiner, agreed to buy Addax last month for $7.24 billion.

KNOC will resurface again elsewhere though, sources say.

In a recent report, the company listed Venezuela's Orinoco oil and Brazil's deep-sea projects as promising.

The Korean government has said it will invest 19 trillion won in KNOC to help the company raise daily production capacity six times to 300,000 barrels by 2012.

Despite their ambitions, the South Korean firms' plans for overseas acquisitions are still a work in progress.

The government says 'go out and buy assets.' But there's no follow up. Where's the process? said the banking source.

The South Korean government in June dispatched delegates to South America to help Korean natural resource, energy and construction companies explore investments in the region. That's a positive step, but compared with China, South Korea so far lacks the experience and money needed for big deals abroad.

South Korea's outbound acquisitions surged in the second half of 2007, with 70 deals worth $8.2 billion, according to Thomson Reuters. The dollar value of the country's overseas acquisitions plunged in the same period a year later, dropping to $2.3 billion worth of deals, though the amount of transactions stayed steady at 72.

China, having notched several major deals in the last few years, remains a major competitor.

State-run Korea Gas Corp failed this month to purchase part of Iraq's oilfield development. That went to a consortium involving Britain's BP and China National Petroleum Corp CNPET.UL (CNPC).

On top of inexperience, another factor for Korea is cash.

Securing enough healthy investment capital at the right time is the most difficult part, said Lee Kio-jung, leader of resources strategy & planning team at KOGAS.

State-run energy firms, including KNOC, joined dollar bond sales this month to fund upcoming outbound M&A's. South Korea separately announced its target of raising a one-trillion won fund for overseas resource development, with KNOC and Korea Resources contributing a combined of 11 percent. (Editing by Valerie Lee)