More questions than clear answers since Yoon’s oil announcement

Posted on : 2024-06-10 18:20 KST Modified on : 2024-06-10 18:20 KST
The project is projected to cost trillions of won, but uncertainty remains
Vitor Abreu, adviser and owner of US geoscience research company Act-Geo, gives a press conference on his firm’s analysis that a gas and oil field may lie beneath the sea floor off of the coast of Pohang on the country’s eastern shoreline on June 7, 2024. (Yonhap)
Vitor Abreu, adviser and owner of US geoscience research company Act-Geo, gives a press conference on his firm’s analysis that a gas and oil field may lie beneath the sea floor off of the coast of Pohang on the country’s eastern shoreline on June 7, 2024. (Yonhap)

Since South Korean President Yoon Suk-yeol announced on June 3 that the ocean floor near Yeongil Bay in the East Sea has the potential to yield up to 14 billion barrels of oil and gas, many people have questioned the president’s claims.  

Australian energy firm Woodside Energy partnered with the Korea National Oil Corp. (KNOC) in 2007 to explore for oil. In January 2023, however, Woodside pulled out from the project, saying it was leaving “blocks no longer considered prospective.” Woodside sold its 50% of equity, which was reported by Korean weekly Sisa In. The blocks that Woodside analyzed are the same ones that the Yoon Suk-yeol administration announced to be prospective (Eat Sea Blocks 8 and 6-1). 

US geoscience firm Act-Geo, however, took the same data that Woodside analyzed, and projected a success rate of 20%. This has certainly raised questions. Vitor Abreu, the firm’s founder and CEO, has a resume that includes Exxon Mobil, but Act-Geo is still a new player. According to the firm’s social media posts, Act-Geo was founded in 2017 and currently employs fewer than 10 people. Its annual revenue stands at US$27,000. By comparison, Woodside Energy employs around 5,000 people and posted US$16.8 billion in annual revenue for 2022.  

To address these questions, Abreu held a press conference at the Ministry of Trade, Industry and Energy briefing room in the government complex in Sejong.  

During his involvement in the project, Abreu said, he found that the three existing wells drilled during previous projects had already yielded a lot of data. The well identified as “Hongge,” according to Abreu, revealed a 400-meter pillar of cap rock that exhibits qualities capable of storing carbon. Abreu estimates that this site has the potential to yield between 3.5 and 14 billion barrels of oil and gas.  

Yet even Abreu admitted that the only way to know for sure is to begin drilling. Among the three existing wells — Hongge (2015), Jujak (2012) and Bangeo (2021) — Woodside and KNOC drilled Honggae and Jujak in a joint operation, while KNOC drilled Bangeo independently.  

When questioned as to why he sees such potential in the project, Abreu responded, “Don't get me wrong. It is still risky,” noting that a projection of a 20% success rate means “there's an 80 percent chance they do not work.” 

“The final step was basically to base on that analysis to rank different prospects and select the top ones because they show geological and geophysical evidence for the presence of possible accumulations,” he said, noting that “the only way to test that now is for drilling.” 

When asked about the size of his company and his professional experience, Abreu responded that as the global oil market shrinks, even major oil corporations are downsizing their operations through layoffs. This means that plenty of experts are available outside the major corporations.  

Smaller operations like Act-Geo being commissioned by major firms to take on projects has become “industry standard practice,” he said.  

Explaining that Act-Geo does not carry out exploratory drilling, but instead is a geoscience firm that analyzes data, Abreu said that nearly every company in this industry devotes around three to five people to data analytics. 

The consultant explained that he has employees in New Zealand, Brazil, Switzerland and the UK. At one point, Abreu said his team had expanded to 15 but is currently at 14 people. 

“It’s not enough to simply compare Act-Geo and Woodside’s analytics,” said Kwak Won-jun, the principal adviser for KNOC, who also spoke at the briefing. 

“In 2021, we conducted a large-scale 3D test of 2,000 square kilometers — four times what we’d tested in the 10 years prior. We started analyzing this data in January 2021, but Woodside, which had been conducting joint explorations with us, announced two months later in March 2022 that it was pulling out. This was before we had properly analyzed the results of the 3D tests,” Kwak added.  

The normal phases of the commercialization of oil and gas start including geophysical explorations, exploratory drilling, and commercial development. Despite still being in the first phase, President Yoon Suk-yeol has said, “This could be the largest oil and gas development project of this century, yielding more oil than the Guyana oil fields in South America.”  

Industry and Energy Minister Ahn Duk-geun has claimed that “based on current estimates, the oil and gas reserves boast a value that is five times the market cap of Samsung Electronics.”  

Yet if the chances of success are 20%, it is worrisome that the government is planning on devoting 100 billion won (US$72.4 million) per exploratory drilling project for five drilling projects slated to begin in December 2024.   

“A 20% chance of success does not mean we succeed one out of every five times. Exploratory geophysics relies on indirect data, so we must be very careful when leaning on specific numbers,” Choi Kyung-sik, a professor of earth and environmental science at Seoul National University, told the Hankyoreh.  

“The waters in the East Sea are deep, so we’re talking about the potential for costs to rise to astronomical levels. The president then personally announced the project, resulting in an even bigger optical illusion,” he went on. 

“The development of natural resources is a long process. It takes years of experience and trial and error before projects are successful. This project looks like it’s going to cost trillions of won. Even if we fail, there still must be something in it for the people of Korea. It’s not just a matter of whether or not the state sponsors it,” the professor added.  

By Kim Yang-jin, staff reporter 

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