Keeping a close tab on the deal

Korea has signed a nonbinding preliminary contract with the United Arab Emirates’ Abu Dhabi National Oil Company, or ADNOC, that allows the rights to at least 1 billion barrels of oil reserves from one of the world’s largest oil companies.

Under the memorandum of understanding, the Korea National Oil Corporation will be able to produce oil as early as 2014, or supplies of worth more than $1 billion, in the Middle Eastern field where American, European and Japanese companies compete as major contractors.

Korea - with little natural resources of its own - has been endeavoring to secure stable oil supplies from overseas amid fluctuating raw material prices in the international market.

Separately, the state-run oil corporation won rights to develop three onshore and offshore drilling areas in Abu Dhabi with a combined reserve of 570 million barrels of crude oil. The contract would push up Korea’s oil and gas self-sufficiency rate to 15 percent from the current 4.2 percent.

The unprecedented oil deal with the world’s third-largest crude oil exporter comes after the United Arab Emirates awarded a Korean consortium in December 2009 a multibillion-dollar project to build four nuclear power plants there.

President Lee Myung-bak flew to the capital of the Persian Gulf state to sign the preliminary deal, which also included an agreement allowing Korea to store 6 million barrels of the Abu Dhabi crude in Korea’s local storage facilities for free in return for access to the reserves in times of emergency.

But it is too early to raise hoopla over the deal as there remain many factors before the two countries sign a final contract.

Korea’s construction of the nuclear power reactors in the UAE had been delayed in the face of an uproar against our financial assistance for the construction project, though both sides finally held a groundbreaking ceremony this time.

Recently, the New South Wales government has also overturned an old agreement allowing Korea to produce coal from deposits in the western Australian basin, wary of a potential damage the deal may bring to the government ahead of elections.

Overseas resource development requires patience and long years of trying, accompanied by many variables that can affect the deal. The government must keep close tabs on the process so that hard-won deals do not end in vain.