South Korea finds massive crude oil, gas prospects in East Sea: Yoon

South Korea, which heavily relies on imports for its energy use, has found a potentially massive reserve of oil and gas offshore close to its southeastern territory in the East Sea, President Yoon Suk Yeol said on Monday.

In his first televised national briefing, the president said he has given the energy ministry the green light to conduct exploration drilling for the vast oil and gas prospects.

“The possibility of the area containing as much as 14 billion barrels of oil and gas is very high,” Yoon told a news conference, citing a study he said has been reviewed by leading research institutions and experts.

“Today, I gave my approval for the Ministry of Trade, Industry and Energy to go ahead with the drilling for exploration deep in the East Sea,” he said.

The presidential office said the government last year commissioned an in-depth analysis of the area for potential oil and gas reserves with US-based research firm ACT-Geo after an earlier study showed a high possibility of gas and oil reserves near the Donghae gas field.

If the volume is confirmed through the drilling, the value of the reserves, off the Yeongil Bay in Pohang, about 260 km southeast of Seoul, is estimated at $1.4 trillion, or five times the market valuation of Samsung Electronics Co., the country’s most valuable stock, government officials said.

Yoon said 14 billion barrels of gas and oil – over 300 times larger than the gas discovered in the Donghae gas field in the late 1990s – would be enough to meet Korea’s natural gas demand for 29 years and oil demand for four years.

EXPLORATORY DRILLING TO START BY YEAR-END

The president said that the first drilling operations to assess reserves will commence by the end of this year, with preliminary results expected by the first half of next year.

The oil and gas development process usually involves three stages: physical surveys, exploratory drilling and commercial development.

The state-run Korea National Oil Corp. (KNOC) will lead the initial drilling with the goal of determining the size of the prospects.

Industry, Trade and Energy Minister Ahn Duk-geun said he expects exploratory drilling to begin in December with commercial production targeted for 2035.

Three-quarters of the prospects are estimated to contain gas and the remaining quarter oil, he said.

Refraining from giving his estimates for exploration drilling costs, the minister said the Donghae gas field development project, which produced 45 million barrels worth of gas, cost some 1.2 trillion won ($872 million).

OIL, GAS SHARES SURGE ON KOSPI

Energy stocks jumped after Yoon's announcement.

Korea Gas Corp. closed up by the daily limit high of 30% at 38,700 won, outperforming the broader benchmark Kospi index’s 1.7% rise.

Daesung Energy Co. also rose by the daily limit high of 30% to finish at 10,990 won.

POSCO International Corp. ended 19% higher at 51,200 won while SK Innovation Co. closed up 6.3% at 106,300 won.

Korea’s continuous efforts in offshore oil and gas exploration since 1966 resulted in the discovery of the Donghae gas field, which produced commercially until 2021.

The country is the world’s second-largest liquefied natural gas (LNG) buyer after Japan and the world’s fifth-largest crude oil importer, according to OECD data.

In 2023, Korea imported 1.06 billion barrels of crude oil and 44.15 million tons of natural gas, according to KNOC.

Write to Gil-Sung Yang at vertigo@hankyung.com

In-Soo Nam edited this article.