Lee signs deal with UAE to develop oil fields
Korea signed deals with the United Arab Emirates yesterday for a historic project to develop oil fields in the Middle Eastern country, securing at least 1.2 billion barrels from the country with the world’s sixth largest reserves.
President Lee Myung-bak and President Sheikh Khalifa bin Zayed Al Nahyan of the UAE finalized the deal during a summit yesterday in Abu Dhabi and attended a signing ceremony. Based on yesterday’s oil price and currency rate, the deals are worth roughly 132 trillion won ($117.5 billion).
Korea National Oil Corporation and Abu Dhabi National Oil Company signed a memorandum of understanding on the development of the country’s major oil fields and a separate accord for in the UAE, the Blue House said.
The project made Korea the fifth country to set foot in the Abu Dhabi oil fields, after the United States, France, the U.K. and Japan. The deal was the first in 38 years under which the UAE has opened the door to a new foreign developer.
According to the Blue House, the MOU will guarantee Korea’s right to participate in the development of one or more oil fields in Abu Dhabi with more than 1 billion barrels of technically recoverable reserves.
The current developers’ rights to the country’s large-scale oil fields will expire starting in 2014 and the Abu Dhabi government will begin negotiations for new contracts next year.
The top four global oil producers - Exxon Mobil, Shell, Total and BP - and Japan’s state-run oil company are the existing contract holders, according to Kwak Seung-jun, head of the Presidential Council for Future and Vision.
“From this deal, we can secure more than 10 billion barrels,” Kwak said. “The terms of our contracts will be similar to the previous deals signed by global producers.”
The Blue House said the MOU is a highly significant step, stressing that the Korean government will do its best to conclude final contracts to realize the deal.
The Blue House said Korea’s participation in developing the oil fields with proven profitability has removed exploration risks. In addition, the high economic and political stability of Abu Dhabi is an important factor in the deals. The two countries’ state-run oil companies also signed agreements to give Korea exclusive rights to three undeveloped oil fields. Preliminary studies showed that the three sites have at least 570 million barrels of petroleum in proven reserves and contracts are expected to be signed this year, the Blue House said, with the aim of beginning commercial production of about 200 million barrels starting 2013.
The deals will also provide the first-ever opportunity for Korea to independently develop and operate oil fields, the Blue House said.
The deals will increase Korea’s oil and gas self-sufficient rate to 15 percent, a step closer to the 20-percent rate considered as the strategic buffer needed to preclude an energy emergency. Korea is the world’s fifth-largest crude oil importer, while the UAE is the second-largest supplier.
“Korea is now entering the land of dreams, where only a handful of major oil developers were allowed to operate,” President Lee said in a press conference, announcing the deals, as he expressed his appreciation to the UAE leaders.
According to the Blue House, an energy security agreement was also reached between the two leaders that the UAE will store 6 million barrels of crude in Korea’s storage facilities free of charge and allow Korea to use it in an emergency. Korea was given the priority right from Abu Dhabi to purchase up to 300,000 barrels daily from its extra crude production.
Ties between Korea and the UAE have deepened during the Lee administration. In 2009, Korea won the contract to build four nuclear power plants in the UAE and Lee today will attend the ground-breaking ceremony at the proposed nuclear power plant site in Braka, about 300 kilometers (186.4 miles) west of Abu Dhabi.
Korea also has dispatched a contingent of special forces for military exchange with the UAE.
Lee arrived in Abu Dhabi on Saturday, beginning his four-day trip to UAE with a visit to Korean troops stationed in Al Ain. Lee will travel to Dubai later today to receive the Zayed International Prize for the Environment for his green growth campaign.
By Ser Myo-ja [firstname.lastname@example.org]
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