As analysis suggests that there may be large-scale oil and gas reserves buried in the East Sea, expectations are growing that the dream of energy independence can be achieved. President Yoon Seok-yeol announced at a press conference on June 3, “The results show that there is a very high possibility that up to 14 billion barrels of oil and gas are buried in the sea off Yeongil Bay in Pohang,” and “It is estimated that this amount can be used for up to 29 years of natural gas and up to 4 years of oil for the entire country.” The Ministry of Trade, Industry and Energy plans to begin exploratory drilling by the end of this year. Exploratory drilling refers to drilling deep into the seabed to actually confirm whether there are resource reserves.
The success rate of this exploration drilling project is 20%. At a press conference held at the Sejong Government Complex on June 7, Vitor Abreu, an advisor at Act-Geo, a U.S. deep-sea exploration consulting firm that conducted a detailed analysis of the possibility of oil reserves in the East Sea, said, “A 20% success rate means an 80% chance of failure,” adding, “The Guyana block in South America, which has the largest reserves among oil wells discovered in the past 20 years, had a 16% chance of success. The East Sea project has considerable potential.”
65 years of oil exploration challenges
According to the Korea National Oil Corporation, the history of domestic oil exploration goes back 65 years. Early oil exploration was conducted on land, not in the sea. It began in 1959 when the National Geological Survey began oil exploration in the Uhang-ri area of Haenam-gun, Jeollanam-do. After failing to discover oil in Haenam, the National Geological Survey continued exploration on land in Pohang in 1964, but failed to achieve results.
The 'Emery Report' published by the United Nations (UN) Economic Commission for Asia and the Far East (ECAFE) in 1968 opened the era of offshore oil exploration. Dr. KO Emery of Woods Hole Oceanographic Institution in the United States stated in the report that "the continental shelf between Taiwan and Japan is likely to be one of the places in the world with the largest oil reserves." Korea quickly turned its attention to the sea, and in January 1970, it promulgated and implemented the Submarine Mineral Resources Development Act to begin full-scale oil development. In June of the same year, a total of seven undersea mining areas were designated through an enforcement ordinance. Of these, the continental shelf between the southern part of Jeju Island and the western part of Kyushu, Japan is 'Mine Area 7'. It was designated as a joint development zone (JDZ) according to the Korea-Japan Continental Shelf Joint Development Agreement (1974). Most of the seven mines are closer to the Japanese archipelago than the Korean Peninsula, and at the time of the agreement, the international law dividing the continental shelf boundary was favorable to Korea. The continental shelf was given importance because it extended from a certain landmass, and Korea's continental shelf reached the Okinawa Trough. However, the International Court of Justice (ICJ) changed the continental shelf boundary standard to 'distance from land' in the Libya-Malta case in 1985. Japan, which gained an advantage, was reluctant to engage in joint development, and the 7th mining area has not produced any significant results to date.
In 1976, former President Park Chung-hee announced the surprising news at a New Year's press conference that "oil has been discovered near Yeongil Bay in Pohang." The people who had experienced the first oil crisis (1973-74) were delighted that "we have become an oil-producing country," but just one year later, it was revealed that "Pohang Oil" was not crude oil pumped up, but refined kerosene that had leaked into the ground.
Efforts to achieve energy independence first bore fruit in 1998 with the discovery of a high-quality natural gas layer in the Donghae-1 gas field, 58 km southeast of Ulsan. A total of 11 drilling holes were drilled, and the natural gas layer was discovered in the 11th drilling. Korea National Oil Corporation produced natural gas for the first time in Korea in 2004, six years later. The Donghae gas field closed due to depletion of reserves after producing 45 million barrels of gas over approximately 17 years until the end of 2021.
World's 5th largest oil refining power
Korea is called a country that "doesn't produce a single drop of oil," but it is an oil powerhouse that imports and refines crude oil and exports petroleum products such as gasoline and diesel to the world. According to 2022 data from global oil company BP (British Petroleum), Korea ranks fifth in the world in terms of crude oil refining capacity, following the United States, China, Russia, and India. According to the Korea Petroleum Association, in 2023, domestic refineries exported a total of 466.72 million barrels of petroleum products to 70 countries around the world. Exports amounted to 46.368 billion dollars (approximately 63.9785 trillion won). Korea National Oil Corporation is currently conducting overseas business in 15 countries around the world, including the United Arab Emirates (UAE), the United States, and Peru.
If oil and gas are discovered in this Yeongil Bay project exploration drilling, an evaluation well will be drilled to confirm detailed reserves, and economic feasibility will be assessed before full-scale development and production. The government expects that construction will begin as early as 2027-2028 and production will be possible for about 30 years starting in 2035. The estimated reserves are 3.5 to 14 billion barrels. Of these, gas is estimated to account for 75% and oil for 25%. If the 14 billion barrels of oil and gas are converted into economic value, it amounts to 1.4 trillion dollars (approximately 1,931.72 trillion won). Korea's dependence on energy imports is 94.4%, the highest in the world, so if the Yeongil Bay project is successful, it is expected to make a significant contribution to energy independence. However, drilling at least five boreholes is required.
If so, a large amount of funds of more than 500 billion won are needed. In a report on June 4 (local time), global credit rating agency Standard & Poor's (S&P) said, "Do not be excited about Korea's oil exploration project," and "It may be very difficult for exploration to lead to commercial production."