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South Korea President Approves Exploration of Potentially Huge Offshore Oil and Gas Prospects

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June 3, 2024

By Ju-min Park and Jack Kim

SEOUL, June 3 (Reuters) – South Korean President Yoon Suk Yeol gave the green light on Monday to conduct exploratory drilling for potentially vast oil and gas prospects off the east coast of one of the world’s largest energy importers.

There is a “very high” possibility the area contains as much as 14 billion barrels of oil and gas, Yoon told a press conference, citing a study that he said was reviewed by experts and industry groups.

“Today, I approved the Ministry of Trade, Industry and Energy to go ahead with the drilling for exploration deep in the east sea,” Yoon said.

The project, with an estimated cost of more than 500 billion won ($363 million), will begin near the end of the year in the hope of finding energy reserves by the first half of next year, he said.

The site was off the southeastern industrial port city of Pohang, Yoon said, with an industry ministry official adding that the prospects are in South Korea’s Exclusive Economic Zone.

Yoon said that South Korea’s exploration efforts for oil and gas since 1996 have tapped gas reserves equivalent to about 4.5 million barrels, with commercial development completed in 2021.

The new prospects promise enough gas to fuel the country for 29 years and oil equivalent to four years of consumption, he added.

Energy stocks in Seoul jumped on the news.

Shares of oil refiner SK Innovation 096770.KS closed with a 6% gain, Korea Gas Corporation 036460.KSjumped 30% to a 17-month high, Daesung Energy 117580.KS also hit the daily limit of 30% and SK Gas 018670.KS advanced by 7%.

The potential volume is eye-catching, said Readul Islam of research company Rystad Energy, emphasizing that nothing is certain.

“Only spinning the drill bit will reveal how much oil and gas is actually present,” he said.

But the project could have huge benefits for the world’s third-largest importer of LNG.

“Any significant volumes of gas found in South Korea could serve to reduce the pressure on LNG producers to meet the increasing demand for the super-chilled fuel globally in coming decades,” Islam added.

The project’s estimated success rate is about 20% based on data received so far, Yonhap news agency said, citing a senior South Korean government official. 

South Korea is the world’s fourth-largest buyer of crude and gas, according to the Korea National Oil Corporation (KNOC), and the ninth-largest energy consumer. 

Three quarters of the prospects are estimated to contain gas and the rest oil, said Energy Minister Ahn Duk-geun, with commercial production targeted for 2035. 

Another industry ministry official said KNOC will lead the drilling, aiming to determine the size of the prospects. Up to 10 wells may be needed to be drilled at a cost of 100 billion won each, said the official, who spoke on condition of anonymity. 

With minimal resources of fossil fuels, South Korea imports all but 1% of its coal, oil and natural gas supplies.

($1=1,376.0500 won)

(Reporting by Jack Kim, Hyonhee Shin, Jihoon Lee, Heekyong Yang, Ju-min Park and Joyce Lee in Seoul and Florence Tan in SingaporeEditing by Muralikumar Anantharaman, Clarence Fernandez and David Goodman)

(c) Copyright Thomson Reuters 2024.

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