Korea's Oil Exploration Gaining Momentum
Development rate projected to grow 10 percent by 2008

Korean companies are accelerating their own efforts to undertake petroleum exploration projects abroad as countries have ratcheted up competition to secure energy resources in the wake of oil price hikes, the Ministry of Commerce, Industry and Energy (MOCIE) said.
MOCIE Vice Minister Cho Hwan-eik told reporters on June 7 that domestic companies invested a meager $370 million in 2001, but investments into the oil exploration sector expanded to $670 million last year, and they are forecast to amount to more than $800 million this year. Korea? own development rate of crude oil, which stood at merely 2.0 percent in 2001, surged to 3.8 percent. The rate is projected to grow at 5 percent this year, representing a 2.5-fold jump over that in 2001. Government figures show that 56 oil exploration projects are under way in 29 countries, and deposits of 700 million barrels of oil and 90 million tons of gas have been secured.
Lee Won-gul, deputy minister of energy and resources policy at MOCIE, said Korean companies have succeeded in striking oil and gas reserve fields so far this year. MOCIE said the latest discoveries of oil and gas reserve fields, large- and small-sized, have allowed Korea to lay a foundation for implementing oil exploration projects in earnest.
A consortium comprising of Korea National Oil Corp. (President Yi Ok-su), Samsung Corp. and Daesung Industries singed a production sharing agreement on the Yemeni 70 Mining Zone, presumed to have reserves of 200 million barrels, with the Yemeni government last April.
GS-Caltex (Chairman-CEO Hur Dong-soo) struck oil n all of the four drilling wells in Cambodia's Block A last February. The results of a survey on the exploratory drilling 130 km off the west coast of Cambodia showed that crude oil reserves are 41 to 149 feet thick, depending on the location of the drilling, and they are found to be of high quality. GS-Caltex has a 15 percent interest in the exploration project, along with Chevron Texaco Corp. of the United States with a 55 percent stake and Japan's Mitsui Oil Exploration Corp. with a 30 percent interest. Each partner has ownership over future production of crude oil and gas according to each stake.
KNOC discovered another gas reserve field in the Donghae-1 Mining Block last March. KNOC also struck oil in Vietnam 11-2 Block with a reserve of 856 billion cubic feet (17 million tons of LNG).
SK Corp. (Chairman Chey Tae-won) acquired the operation rights to an oil field in the United States in a bid to directly engage in the exploration of crude oil departing form its past practice of possessing stakes in oil fields only last March 20. SK Corp. obtained a 87.5 percent interest in Iberia North oil exploration block in south Louisiana through its U.S. subsidiary SK E&P.
SK Corp. Shin Hun-chul said the company will launch the exploration project this year as the company is trying to employ diverse means to secure the exploration right for the oil field in addition to the acquisition of a stake. It is the first acquisition of an oil field in a foreign country by SK Corp. in 10 years since its failure to find oil in a mining zone in Myanmar in 1995.
In particular, Korean companies are scheduled to explore promising oil and gas reserve fields in the latter half of this year. Given the trend, Korea's own development rate of oil is projected to surge to 10 percent by 2008, MOCIE forecast.
Making the most of the momentum in Korea's overseas petroleum exploration, MOCIE is concentrating its available capability on exploring oil and gas reserve fields, while making strenuous efforts to streamline related laws and systems.
In this regard, the ministry plans to foster KNOC as an institution specializing in energy resources, while expanding favorable loans on the condition of success to spur the private sector's participation in the oil exploration sector.
Government agencies and public corporations whose responsibilities do not include oil exploration are required to obtain recommendations from the chiefs of relevant ministries. The measure is designed to preempt unprofessional public corporations?reckless foray into oil exploration that has stirred up controversy in recent months.
The ministry plans to simplify administrative procedures in accordance with a reporting system on conducting overseas oil exploration projects, while strengthening administrative and financial support to encourage overseas petroleum exploration.
Korea Institute of Geosciences & Mineral Resources (KIGAM) will provide support for conducting feasibility studies to smaller companies and newcomers lacking professional manpower. The government will consider expanding the budget on the financial support for overseas oil exploration, while studying a possibility of introducing funds on petroleum exploration to draw investments from the private sector.
MOCIE Vice Minister Cho said, "Details have yet to be determined, but the ministry's task force will draft a comprehensive plan by late July before finalizing it.
The MOCIE vice minister said it is impossible for the government to scrutinize the private sector's entry into the overseas oil exploration market under the current report system. He made the comment on a question about what steps the government will take as countermeasures designed to prevent side effects as speculative investments and frauds could develop during overseas energy exploration projects, considered to be highly risky and require a huge capital, until they are regulated. However, companies will make efforts to attract capital and investments from the private sector. The government will strengthen its examination into extending loans on the condition of success while working out institutional supplementary apparatuses when it considers introducing private sector's funds, he said. nw

Lee Won-gul, deputy minister of energy and resources policy at MOCIE

Korea National Oil Corp. President
Yi Ok-su

SK Corp. Chairman
Chey Tae-won

GS-Caltex Chairman-CEO
Hur Dong-soo