Government secures 12 billion won to develop a deep-sea gas field in the East Sea

Donghae gas field. Courtesy of Korea National Oil Corporation

The government and the Korea National Oil Corporation (KNOC) have secured 12 billion won to develop a deep-sea gas field in the East Sea starting this December. The government and the KNOC plan to start exploratory drilling at one promising structure by investing about 100 billion won for four months from December, but it is expected to be difficult to receive the rest of the budget due to a backlash from opposition parties.

On June 16, a government official said, "We have 12 billion won secured," adding, "Most of them are deposit and down payment for Seadrill.” Earlier, the KNOC signed a drilling service contract with Norwegian company Seadrill and completed bidding for a service contract for operating a helicopter to and from Gimhae Airport.

Although it is said to have secured 12 billion won, it is known that about 100 billion won is needed to drill a borehole. According to the government and the KNOC’s plan, the first exploratory drilling will be completed next year, so the remaining 88 billion won should be reflected in next year's budget. This will require the cooperation of the National Assembly. The government and KNOC believe that at least five boreholes will have to be drilled over the next five years, considering the success rate of about 20 percent. Each borehole will cost 100 billion won, totaling 500 billion won.

Earlier, the Ministry of Trade, Industry, and Energy reported at the general meeting of ruling People’s Power Party (PPP) on the 13th that it would push for the use of a special loan system for overseas resource development along with government investment to support the KNOC from next year. The loan is a system that lends government funds to companies engaged in high-risk businesses, such as overseas resource development. If the project fails, the loan will be exempted, and if it is successful, a special levy is collected in addition to the principal.

Since the massive overseas resource development failures under the Lee Myung-bak administration, the government has only provided the success loan to private companies, not public ones. The Ministry of Trade, Industry and Energy plans to resume the successful loan system to the state-owned KNOC in consultation with the Ministry of Strategy and Finance and other related ministries as the need for government support for the deep-sea gas field project in the East Sea has grown.

However, the opposition has maintained that it is difficult to cooperate on the drilling budget as not enough information about the project has been disclosed. As a result, it is unclear whether the budget will be secured after next year, when exploratory drilling begins in earnest. In a written briefing, Hwang Jeong-ah, a spokesperson for the main opposition Democratic Party of Korea (DPK), called the deep-sea project a "oilfield gate" and said, "We will hold the government accountable for pushing ahead with the project without verification.” At the party's policy meeting on 11th, Jin Sung-joon, chairperson of the DPK’s policy committee said, "We cannot increase the drilling budget without clarifying the truth," adding, "The government is also refusing to submit data to lawmakers, which is itself an admission of the suspicion."

※This article has undergone review by a professional translator after being translated by an AI translation tool.