Securing Overseas Oil Fields

KNOC works hard to reduce reliance on crude oil imports by boosting foreign oil exploration

The Korea National Oil Corp. is to disburse 1.015,1 trillion won for projects, services and purchases in over 677 cases this year. KNOC said on its online public notice that the company would spend the 1.015,1 trillion won in projects over 228 cases, 98.1 billion won over 145 cases for services, and 121.1 billion won for the purchase of goods over 254 cases this year. KNOC officials said they made the announcement online because they wanted to make their fund disbursement transparent.
They said KNOC is set to order a public project Nos. 18-19 of the first stage of the three stages of the No.2 plant of Pyeongtaik Production Facility amounting to 209.7 billion won in February. This would be followed in April by the order for Nos. 20-21 of the second stage of the three-stage project of the second plant of Pyeongtaik Production Facility. In June, the company plans to order the second stage of the fifth expansion project Nos. 15-16 of the Tongyong Production Facility in the amount of 320.3 billion won.
The Korea National Oil Corp. quoted the International Oil Price Experts Council as saying that international oil prices would range around $60 per barrel on average in the New Year, citing unstable geopolitical factors, particularly the Iran nuclear standoff.
The council made of civilian, and government petroleum experts held its 27th meeting on Dec. 18, last year at the head office of KNOC to discuss the oil prices under the theme of "the prospect for oil prices in 2007."Experts came from such organizations as the Ministry of Commerce, Industry, and Energy, KNOC, the Energy Economy Research Institute, the Bank of Korea, the Defense Research Institute, the Samsung Economic Research Institute, and other international oil market and Middle East experts.
They concluded that the supply of oil would remain tight this year, although the oil supply from non-OPEC countries would be able to match the oil demand surge, loosening the supply-demand situation in the international oil market.
If the oil prices drop below the $50 to $55 per barrel level, OPEC would try to prevent the fall by increasing the supply of crude oil in a manner consistent with what it had done in the fourth quarter of last year by allowing the member countries to produce more oil. But the council said that various insecure factors such as the Iranian nuclear crisis, Nigeria's political instability, and Iraq's civil unrest and other geopolitical instability will continue to exist this year, too.
Therefore, the price of crude oil would remain on the $60 per barrel level due to the geopolitical unrest. But the possibility for the oil price rising above the $60 per barrel remains high in the case of further weakening of the U.S. dollar and increases in the dollar inflow into the oil futures market.
KNOC has been engaged in oil drilling in a number of foreign countries. In Vietnam's Rong Doi gas field, the company has been pumping gas from its two gas drilling platforms. KNOC jobsite officials said the platforms would produce some 2,900 tons of gas and 4,200 barrels of oil daily from the oil field from May for 29 years, bringing a tremendous profit to the company. Total sales alone would reach around $1.6 billion and net profits around $500 million.
But the gas field 11-2 bloc was proven to contain gas deposits in 1998 after 15 years of hard drilling work, almost at the point of being given up by the Korean consortium including LG International, Daesung Industry, Daewoo International, Hyundai International, Samhwan Enterprise, and Seoul City Gas.
The gas and oil field was also given up for dead as it was located some 320 km off the mainland and needed a pipeline to be commercially operative, which was nearly impossible for economic reasons.
But the oil field found its life after getting permission from British Petroleum, which found an oil field nearby and was building a pipeline for transport.
KNOC is also part of the government plan to search for oil fields in the Kurdish region of northern Iraq. The Ministry of Commerce, Industry and Energy has dispatched a mission composed of representatives from the Ministry of Foreign Affairs and Trade, SK Corp. and GS Caltex headed by Korean Ambassador to Iraq Chang Ki-ho to meet with Iraqi government officials to discuss the development of oil fields in the Kurdish region with Korean capital and technology. The Kurdish regional authority invited the Korean mission.
MOCIE officials said the Kurdish region is more stable than other Iraqi regions and is friendly to Korea. These hospitalities are due to the help extended by Korean troops to the region in building hospitals and other necessary reconstruction of the region that had been damaged by armed skirmishes.
Iraq has the third largest oil reserves in the world after Saudi Arabia and Iran with 115 billion barrels and currently produces only 2 million barrels of oil daily due to the Iraqi war, down from the peak of 3.5 million barrels per day reached in 1979. nw

KNOC President Hwang Du-yeol.