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Choe Nam-ho, the second vice minister of trade, industry and energy, speaks at a press conference regarding the possibility of oil and gas reserves in the East Sea on June 10, 2024. (courtesy of MOTIE)

Korea plans on redrawing deep-sea blocks in the East Sea to diffuse the risk of gas and oil development and attract foreign investment. This plan has emerged amid growing controversy over development costs.
 
The government also plans to decide where to drill the first well by July and start drilling by the end of December.
 
At a press conference held at the government complex in Sejong on Monday afternoon, Second Vice Industry Minister Choe Nam-ho said that the government will hold a strategy meeting on the development of deep-sea blocks in the East Sea later this month to discuss attracting foreign investment and revising the Submarine Mineral Resources Development Act. 

“The biggest factor that needs to be decided in regards to foreign investment is the division of deep-sea blocks,” Choe said.
 
The idea is to redefine the blocks, which are currently divided into three sections — the East Sea Blocks 8, 6-1N, and 6-1C — according to the seven locations identified by Act-Geo that potentially house oil and gas reserves.
 
After reorganizing the blocks around these locations, the company plans to attract foreign capital for each block. To do so, the Korea National Oil Corp. will first return the blocks in which it holds a 100 percent stake to the government, which will then grant development rights based on the newly established blocks.
 
“Several companies are interested in facilitating foreign investment,” Choe added.
 
This move seems to have been made in order to share the financial burden and risk of failure of gas and oil development, with each drilling site estimated to cost at least 100 billion won (US$72.6 million). The strategy also takes into account the difficulty of passing a budget bill that includes drilling costs, as the opposition Democratic Party is determined to verify the entire validity of the oil announcement in the National Assembly. 

“The cost of drilling at the end of this year will cover the start-up cost [of the total development project],” Choe said.

The money the government can spend on the first drilling is likely to come from a portion of the 39.8 billion won budget for oil field development projects in this year’s special account for energy and resources projects. The 39.8 billion won budget also includes other field development projects, but the Ministry of Trade, Industry and Energy (MOTIE) did not disclose the exact budget.
 
“These are prospects that must be explored,” Choe stated. “If I could have it my way, I would like to drill all seven blocks, but we have settled with five since we believe that the 20 percent chance of extricating gas means that we will be able to get gas at least once in every five attempts, meaning that we should go ahead with at least five drillings.”
 
“How much money will be needed for exploration work in 2025 will be reviewed during budgeting from June to August,” said an official at the Ministry of Economy and Finance, adding, “We haven’t started discussions with MOTIE.”
 
During the meeting, Choe also responded to questions concerning the oil announcement. First, in response to criticism that Act-Geo, the geoscience firm commissioned to analyze the blocks, had been temporarily relieved of its corporate status for unresolved tax issues, Choe said, “That seems to have been a mistake made on the part of Act-Geo, but now there is no problem as it paid its taxes [of US $1,650] in March 2023, before the Korea National Oil Corp. made its payment in May 2023.”
 
He also explained that three, not four, companies placed bids in the exploration consulting tender. Choe explained that the original announcement of four companies was a simple mistake.
 
Choi also corrected Act-Geo adviser Vitor Abreu’s statement made during a press conference on Friday about the risk of failure to find oil being that they hadn’t found any hydrocarbons yet, stating that there was an error in interpretation.
 
Choi clarified by stating, “It means that the work previously conducted by Woodside Energy and the KNOC in the previous three existing wells — Hongge, Jujak and Bangeo — failed to find economic hydrocarbons.”

By Choi Woo-ri, staff reporter; Choi Ha-yan, staff reporter

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