5 global firms want in on potential oil reserves in East Sea: KNOC

Korea National Oil Corporation CEO Kim Dong-sub speaks during a briefing in Sejong on Wednesday. [YONHAP]

Five global oil companies have shown interest in participating in the development of potential oil and gas reserves off Korea's east coast, according to the Korea National Oil Corporation (KNOC) Wednesday.

"One of those five is a major global oil company that conducted an additional verification test in early May regarding the result and the methodology [of the study] conducted by the KNOC and ACT-GEO," said Kim Dong-sub, CEO of the state-run oil company. in a briefing Wednesday.

Kim added that this company's interest in the project has progressed as far as a mutual nondisclosure agreement with the KNOC to have more access to the project's data.

"In order to successfully secure investment, the KNOC plans to hold explanatory sessions about the project, also known as a road show, with global oil companies that have the technology and financial resources," Kim said.

"We need overseas investment in order to diversify the risk and relieve the financial burden of this oil project, which by nature requires a large-scale investment."

The KNOC expressed preference for companies with a vast amount of experience in deep sea exploration regardless of public or private status.

A specific timeline for the fundraising efforts and the target amount "haven't been confirmed yet," according to the CEO.

"A lot of variables need to be considered for this project," Kim said, adding that resegmentation of the deep-sea blocks in the East Sea is one of the issues.

The Ministry of Trade, Industry and Energy earlier this month said it will push for a reconfiguration of the East Sea area in order to reflect the recent discovery of potential oil and gas reserves in seven locations.

"We are thinking of simplifying the segmentation and also revising the conditions when signing a contract for each segment so that it is more favorable to us," Kim said.

The KNOC said it plans to start the first round of drilling for the project by the end of this year.

Oil reserve projects usually proceed from deep-sea exploration to drilling, development and then production.

Kim said Korea has the capacity to conduct the exploration and analysis, but lacks experience in the process beyond that.

"From the process of drilling, a lot of money is required and the complexity of the project jumps. You have to go down in the water 1,200 meters and then another 3,000 meters [into the sea bed]. You have to find the right spot by drilling a small hole into it. It would be really challenging for us to do it by ourselves," the CEO said, explaining why the KNOC is looking for investors despite the entailed profit-sharing should the project be successful.

Korea in early June announced that it potentially found oil and gas reserves amounting to as many as 14 billion barrels buried off Korea's east coast near Yeongil Bay in Pohang, North Gyeongsang, which would be 300 times bigger than the discovery in the East Sea during the 1990s.

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]