As the drilling results of the promising structure 'Blue Whale', where gas and oil reserves were expected, concluded that "there is no economic feasibility," the remaining six promising structure drilling operations will likely have to rely entirely on attracting foreign investment. Budget authorities noted that it is difficult to allocate relevant government funds in the supplementary budget, and whether it will be included in next year's budget depends on the review results from the Ministry of Trade, Industry and Energy. However, since the initial drilling lost its persuasiveness from the start, it is expected that it will not be easy for the Ministry to argue for a budget injection.
According to the Ministry of Trade, Industry and Energy and the Korea National Oil Corporation (KNOC) on the 7th, the preliminary conclusion from the first exploration drilling of 'Blue Whale', one of seven promising deep-sea gas structures in the East Sea, was that "it did not reach a level where we can determine that it has economic feasibility." This site was expected to be the largest among the promising structures.
In the case of the first drilling, which reached a conclusion this time, the Korea National Oil Corporation covered all the expenses. The drilling cost per well is 100 billion won. Initially, it was planned to procure about 50 billion won from the government budget and the remaining 50 billion won from the corporation's own funds. However, after the emergency martial law in December last year, the reduced budget proposal passed, and the initial government support budget was also abandoned. Consequently, the Korea National Oil Corporation issued corporate bonds last month to raise about 590 billion won.
Interest is focused on how to secure funding for the drilling operations of the remaining six promising structures, named 'Squid', 'Pollock', and others. The government has stated that it will attract foreign investment starting from the second drilling. The bidding announcement is planned to take place by the end of March at the latest. A senior official from the Ministry noted, "Some corporations have expressed their intention to bid," and added, "In typical resource development cases, it is rare for drilling success to follow from the first well. Looking at the first well's drilling results itself, I cannot say that the prospects for attracting investment are positive, but we need to reduce (resource development) risks through attracting investment in the future."
Despite the announcement of these results, the ruling party maintains its position that budget support should be provided through the supplementary budget. Park Soo-min, spokesperson for the People Power Party, stated that "from a long-term perspective, the Ministry of Industry and the Korea National Oil Corporation should plan what is most rational, and if support through the supplementary budget is necessary, they should provide it in the long term."
However, as the initial drilling results have lost their persuasiveness for advancing the development project, there are forecasts that it will be difficult to reflect the project budget in the supplementary budget immediately. A government official said, "This year's (drilling-related) expenses have likely all been incurred by the Korea National Oil Corporation," and added, "If necessary, we should discuss including it in next year's budget as it will be difficult to include it in the supplementary budget."
It is uncertain whether the drilling-related budget can be formally allocated in next year's budget. A government official remarked, "It is first necessary for the Ministry to review whether the second and third drillings have the potential to be future food sources worth injecting a budget."
The Ministry, being a key party, is in a weakened position to request budget support. At the end of last year, the Ministry criticized the budget cut for 'Blue Whale' by saying that "it is no different from abandoning energy security." This indicated that government support is essential as it is directly connected to national economic development and energy security.
However, it now appears they have taken a step back. A senior official from the Ministry stated the day before that "(the drilling) is a project where achieving results compared to input is not easy, and opinions on whether 'risk reduction' or 'future profit expansion' is better vary among experts and the public," adding, "The government plans to collect opinions from experts and the public regarding the necessity of attracting investment and budget injection."
Consequently, the success or failure of related projects will likely depend on attracting investments from large overseas oil corporations. The Korea National Oil Corporation previously held a roadshow showing its potential by opening data analyzed against major global oil companies such as ExxonMobil, Saudi Arabia's Aramco, and Italy's Eni. Some overseas companies that reviewed the exploration materials for the East Sea gas field have explicitly expressed their willingness to participate, and it is reported that one major global oil corporation has sent key executives to South Korea, expressing a desire to invest as early as possible in the development.