What really matters is economic feasibility

The project to explore oil prospects in the waters off the southeast coast may become another source of political bickering. Majority Democratic Party (DP) leader Lee Jae-myung on Facebook worried about squandering tax money on a project that is “bound to fail with a success rate of just 20 percent at most.” He vowed a “thorough inspection” on the budgetary spending. DP spokesman Noh Jong-myun called the government’s announcement a “political show” staged for fear of the president’s approval rating sinking under 20 percent.

The DP has reversed its position from its immediate response of “offering full backing” when President Yoon Suk Yeol announced that he gave the go-ahead on state-funded exploration on the sea of the Yeongil Bay off Pohang upon “verified” prospects of the undersea area bearing 14 billion barrels of petroleum and gas on June 3.

The shift in the DP’s position would have come from an attempt to steal the spotlight on the governing front, but also out of various questions about the oil exploration.

The first question involves the reliability of the so-called “verifiable” expert, the U.S. consulting firm ACT-GEO, which has been confirmed as a self-employed business with marginal revenue. Founder and CEO Vitro Abreu held a press briefing in Seoul last Friday to personally answer to the reliability issues.

The international response has also been cool. Standard & Poor in a report last Tuesday advised investors not to overreact to the news, finding little possibility of the exploration uncovering commoditization. The government in 1976 also raised a hoopla over oil reserves off Yeongil Bay, but stopped the exploration a year later. A gas well discovered in 1988 off the coast of Ulsan shuttered after squeezing out just 45 million barrels.

Moreover, Woodside Energy, a major Australian energy group, called off the project last year after working with the Korea National Oil Corporation for 15 years to tap gas reserves in the same locations the government claims hold large fuel deposits upon concluding them to be “no longer prospective.” A different evaluation on the same locations naturally raises doubts.

For a country that relies on imports for 98 percent of its energy needs, energy security through stable energy sourcing should be a top national agenda. But the latest news invites political speculation due to a lack of clear answers to the economic and commercial prospects. The government’s hyperbole about the reserve possibly holding a commercial value five times greater than Samsung Electronics’ market cap can prove to be a pipe dream if it is not backed by strong grounds for economic feasibility.