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A tanker sits on the sea off the coast of Pohang in southeastern Korea on June 3, 2024. (Yonhap)

The Yoon Suk-yeol administration has claimed that massive reserves of oil and gas may be buried under the waters off the coast of the southeastern city of Pohang, but the industrial and commercial feasibility of the project remains in question. The administration has projected a 20% chance that drilling will find gas and oil reserves. The process of scouting sites, drilling for oil, and finally producing commercial petroleum is usually long; it’s also a high-risk, high-reward activity. The risk of failure alone is sufficient grounds for anybody to take off their rose-colored glasses, say experts.

According to the government’s announcement on Monday, at least 3.5 billion barrels and up to 14 billion barrels of oil and gas may be buried around 1 km beneath the ocean floor in the East Sea off the coast of Pohang (around 38 to 100 km from Yeongil Bay). However, these are mere estimates, and it would take actual drilling to verify the presence and amount of oil and gas. The Yoon administration says there could be up to 1.29 billion tons of gas and 4.22 billion tons of oil. Based on current national consumption rates, this would be enough gas for 29 years’ worth of use and up to four years’ worth of oil. 

The Yoon administration announced that the oil and gas were detected during the process of exploring the vicinity of the Donghae gas fields, which were thought to have been depleted of gas. The South Korean government commissioned US geoscience firm Act-Geo to conduct an in-depth analysis of the area in February of last year. While the results of Act-Geo's study indicate the potential for oil and gas reserves, they are not conclusive, and Act-Geo reported that there is no guarantee at the end of last year. The South Korean government reportedly spent the next five months consulting various domestic and overseas experts to verify the results.  

Exploratory drilling to verify the presence of oil and gas is scheduled to begin at the end of the year. The cost of drilling into the ocean floor once is expected to exceed 100 billion won (US$72.8 million). Yet the government is planning on at least five drilling phases. To finance the project, the state is planning on mobilizing the national budget, Korea National Oil Corp. funds, and investments from overseas firms. Choe Nam-ho, the second vice energy and industry minister, has indicated that the Yoon administration will not be held financially responsible, even if the project fails.

The project is still in its earliest phases. Energy industry experts have adopted the stance that nothing is certain until drilling starts. It’s too early to determine profitability and commercial feasibility based on the costs of drilling, development and production. Even if the drilling at the end of this year reveals the presence of oil and gas, there’s no telling how long it will take to get actual barrels of oil and gas on the market — not to mention what kinds of obstacles there may be along the way. 

“If the oil and gas are really there, construction of the industrial facilities will proceed from 2027 to 2028, and commercial development will begin around 2035,” said Energy and Industry Minister Ahn Duk-geun.

Meritz Securities released a report the same day saying that “it’s difficult to determine the results of the exploratory drilling at the current stage.”

“It’s important to acknowledge that the figures cited by the government are just estimations, and may differ from the actual amount of oil and gas,” the report added. 

“The exploratory phase of scouting oil and gas sites takes a long time, but the chances of actually uncovering resources are low. This is going to take a while,” said an industry insider. 

SK Earthon and Posco International are the only domestic firms with the technical capacity to conduct the drilling. These firms typically spend years scouting sites for potential oil and gas fields in overseas waters before they determine commercial viability. The gas fields in waters off Myanmar, for instance, were up and running a full 12 years after the project started.

By Choi Woo-ri, staff reporter

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