South Korea Embarks on Ambitious Oil and Gas Drilling

South Korean President Yoon Suk Yeol approved exploratory drilling for potentially vast oil and gas reserves off the nation's east coast. The project, estimated at $363 million, could reveal prospects containing 14 billion barrels of oil and gas, anticipated to fuel the country for up to 29 years.

South Korean President Yoon Suk Yeol gave the green light on Monday to conduct exploratory drilling for potentially vast oil and gas prospects found 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 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%. 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.

South Korea has minimal fossil-fuel resources and 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 (LNG) after Japan, and the fifth-largest importer of oil, OECD data shows. ($1=1,376.0500 won)