South Korean President Yoon Suk Yeol announced on Monday approval to conduct exploratory drilling for potentially vast oil and gas prospects off the east coast of the nation that is one of the world's largest energy importers.
There is a "very high" possibility the area contains as much as 14 billion barrels of oil and gas, Yoon told a press conference, citing a study he said was reviewed by experts and industry groups.
"Today, I approved the Ministry of Trade, Industry and Energy to go ahead with the drilling for exploration deep in the East Sea," Yoon said.
The project, estimated to cost more than 500 billion won ($363 million), will begin near the end of the year in hopes of finding energy reserves by the first half of next year, he said.
The site was off the southeastern industrial port city of Pohang, Yoon added, with an industry ministry official adding that the prospects are in South Korea's Exclusive Economic Zone.
Yoon said South Korea's exploration efforts for oil and gas beginning in 1996 have tapped gas reserves equivalent to about 4.5 million barrels, with commercial development completed in 2021.
The new prospects promise enough gas to fuel the country for 29 years and oil equivalent to four years of consumption, he added.
Energy stocks in Seoul jumped on the news.
Shares of oil refiner SK Innovation closed up 6%, Korea Gas Corporation jumped 30% to a 17-month high, Daesung Energy also hit the daily limit of 30%, and SK Gas climbed 7%.
The potential volume was eye-catching, said Readul Islam, senior vice president of research firm Rystad Energy, but warned, "Only spinning the drill bit will reveal how much oil and gas is actually present."
For the world’s third-largest importer of liquified natural gas (LNG), he added, "Any significant volumes of gas found in South Korea could serve to reduce the pressure on LNG producers to meet the increasing demand for the super-chilled fuel globally in coming decades."
South Korea is the world's fourth-largest buyer of crude and gas, according to the Korea National Oil Corporation (KNOC), and the ninth-largest energy consumer.
Three-quarters of the prospects are estimated to contain gas and the rest oil, said Energy Minister Ahn Duk-geun, with commercial production targeted for 2035.
Another industry ministry official said KNOC will lead the drilling, aiming to determine the size of the prospects. Up to 10 wells may be needed to be drilled at a cost of 100 billion won each, said the official, who requested anonymity.
With minimal resources of fossil fuel, South Korea imports all but 1% each of its supplies of coal, oil and natural gas.
It is the world’s second-largest importer of liquefied natural gas after Japan, and the fifth-largest importer of oil, the Organisation for Economic Co-operation and Development (OECD) data shows.
