Korean Firms Boost
Investments in Overseas
Petroleum Exploration

Korea's overseas exploration projects have improved in terms of quality and quantity

Korea's efforts to explore overseas energy resources have been accelerated at a faster-than-expected pace. Lee Seung-woo, director of Oil & Gas Development Division of the Ministry of Commerce, Industry and Energy (MOCIE) said, "A survey of 35 companies which have already entered the overseas petroleum exploration market or intend to do so indicates that they aim to invest $3.7 billion during 2007, a 42.3 percent surge over an earlier projection of $2.6 billion."Investments into overseas energy resources development projects during last year were worth $2.1 billion, surpassing a provisional calculation of $1.7 billion. The 2006 figure represents a nearly a two-fold jump from $1.11 billion in 2005.
Director Lee said the number of newly tapping overseas mining fields is initially projected at 24 during 2007, the same figure in the previous year, but the survey shows that the 2007 figure is tallied at 33.
Korea's investments into overseas petroleum projects, except those in such general mineral resources as coal and iron, during 2006 were worth $1.9 billion above an earlier estimate of $1.5 billion, and the 2007 figure is projected to grow at $3.1 billion.
Kim Dae-il, an official at the Oil & Gas Development Division, said "A survey of Korean energy resources developers, conducted in the early 2006, found that they planned to invest a whopping $2.1 billion during 2006, an unbelievably too high, so the ministry conservatively put the projection at $1.5 billion, but surprisingly, the actual value of investments reached $ 1.9 billion, equivalent to 90 percent of their investment plans." "Supported by summit talks on overseas energy development and a boost in government subsidies amid prospects of prolonged crude price hikes, Korean developers are accelerating efforts to explore mining fields after successfully acquiring stakes in the mining zone in Kamchatka (discoverable reserves of 2.8 billion barrels) and the OPL Mining Block in Nigeria (discoverable reserves of 2 billion barrels)."For Korea, which depends on foreign imports for 97 percent of its energy needs, petroleum exploration for the purpose of securing a stable supply of energy has been already a national agenda of the government has to grapple with in the energy security and economic perspectives as countries are in a fierce competition in securing a stable energy supply.
Korea's expansion in its own petroleum development may play an essential role in securing energy security in the case of contingencies.
Officials said Korea petroleum developers are required to bring into Korea crude oil and gas produced on their own or through swaps with other mining blocks to tide over energy crises by law.
Korea is striving to tap petroleum mining fields in such countries in Africa, Southeast Asia and CIS region other than those in the Middle Eastern area, which accounts for 62 percent of the world's crude reserves, a factor for causing political uncertainties.
Overseas petroleum exploration projects have a potential to evolve into a new growth engine behind the development of the national economy. In case of crude oil price hikes the overseas petroleum exploration industry may provide the momentum for the national economy to maintain a constant growth as a cash cow of the national economy, while imports of crude oil produced through its own development could cushion the economic effects caused by crude oil price hikes. Overseas petroleum development is expected to ensure a balanced development of the energy resources industry and maximize spill-over effects into such related industries as plant equipment and energy infrastructure buildup, stemming from their joint projects with Korean petroleum developers in foreign countries.
The Korean government has been expanding its budget related to overseas petroleum exploration. It has been boosting its investments into developing Korea National Oil Corp. into a energy resources developer and securing mining blocks under development and production. Government investments into overseas petroleum exploration surged to 354.7 billion won in 2007, a 28-fold jump over 2002. Government loans soared from 168.5 billion won in 2002 to 357.6 billion in 2007 to spur the private sector's investments into overseas petroleum exploration. A petroleum development fund worth 200 billion won was launched on Nov. 29, 2006 in Korea for the first time to draw fluid money in the domestic financial market into the overseas petroleum exploration field.
Korea's history of exploring petroleum fields is short. It was in 1981 that Korea began to tap petroleum mining blocks in Western Madura, Indonesia for the first time. Figures compiled as of December 2006 showed that Korea has been involved in 166 petroleum exploration projects, of which 86 in 31 countries are now under way.
Prompted by crude price hikes and such government support steps as summit talks, the number of new petroleum exploration projects increased from 14 in 2005 to 24 in 2006.
The participatory government of President Roh Moo-hyun has secured an additional 8.8 billion barrels of probable reserves, bringing Korea's total probable reserves to 14 billion barrels. Korea's own petroleum development is expected to post quite a higher growth during the next three to five years than the achievements made during the past 20 years.
Korea aims to raise its own crude oil/gas development rate from 4.1 percent to 10 percent in 2008 and 18 percent in 2013.
The nation's overseas petroleum exploration projects showed signs of improvement in terms of quality.
The number of mining blocks with more than 1 billion barrels of probable reserves has risen recently, particularly to five in 2006, including the offshore mining block in Western Kamchatka with probable reserves of 3.7 billion barrels.
Korean petroleum developers have increasingly acquired operational rights of mining blocks, based on their accumulated technology and experiences, departing from a patterning of taking over stales. The number of mining blocks where Korea has operational rights rose from 17 in 2002 to 34 in 2006.
Korea has successfully carried out petroleum exploration projects with its own survey/development/production technologies, thus solidifying its energy self-sufficiency. Korea completed gas production facilities in the 11-2 Mining Block in Vietnam, the first own development and production project, while the nation inked a final contract to tap the oil sands in Canada in July 2006. KNOC has a 100 percent interest in the oil sands with proved reserves of 250 million barrels. nw

Minister of Commerce, Industry and Energy Kim Young-ju.