[Q&A] Actgeo Advisor "Success Rate Around 20%, But 80% Failure Possible"

Key Points of the Press Conference on the 7th

Vitor Abreu, Advisor at Actzio, is explaining about the East Sea deep-sea gas field at a press conference held at the Government Sejong Complex on the 7th.

Vitor Abreu, a consultant at Actgeo, stated on the 7th that "an estimated success rate of 20% is a very favorable figure indicating a high level of possibility." Actgeo is a U.S. consulting firm that confirmed the potential for oil and gas deposits in the deep sea of Yeongil Bay, Pohang, Gyeongbuk.

On that day, Consultant Abreu held a press conference at the Government Complex Sejong and explained the success potential of the East Sea deep-sea gas field. Abreu said, "The largest well discovered in the past 20 to 25 years, Guyana, had a success probability of 16%, and it discovered recoverable oil reserves equivalent to about 4 billion barrels," adding, "The basin we analyzed (East Sea deep-sea gas field) has similar types of factors."

The government and the Korea National Oil Corporation estimate that the exploratory resource volume of the East Sea deep-sea gas field ranges from a minimum of 3.5 billion barrels to a maximum of 14 billion barrels. Regarding this, Consultant Abreu explained, "The 14 billion barrels represent the maximum figure indicating that 'there is sufficient porosity (gaps between soil particles) in the rock, and a sufficient amount of petrochemical gas may be contained in these pores.' Since uncertainties still exist, there is a gap, and the only way to reduce this is to drill now."

The following are the main points from the Q&A session held at the press conference that day.

-What is the basis for the high evaluation of the success potential of the East Sea deep-sea gas field?

▲Consultant Abreu: It should not be misunderstood that 'there is a 20% chance of success' means 'there is also an 80% chance of failure.' If only one promising structure (a geological structure with a high possibility of gas or gas deposits) had been identified, drilling probably would not have been recommended. We identified seven promising structures. The project is currently in phase two. By the time phase two is completed, we expect to identify several more additional promising structures. These seven promising structures show some geoscientific evidence indicating the potential presence of oil. Therefore, we judge that 'drilling is advisable.'

-What is the background of Actgeo's participation in the analysis of the East Sea deep-sea gas field?

▲Kwok Wonjun, Senior Researcher at Korea National Oil Corporation: Following the end of production at the East Sea gas field in 2021, exploration and evaluation of the deep-sea area were conducted to find a second gas field. In 2023, a competitive bidding process was held for four companies for the comprehensive deep-sea evaluation. Actgeo was fairly selected based on technical and price evaluations.

-Some question the reliability of the analysis due to 'Actgeo's small scale.'

▲Consultant Abreu: It is true that the address listed for Actgeo is my home. Actgeo is a consulting firm. All we need to work are a computer, software, and a camera. Small consulting research companies like ours are not companies that conduct drilling. We are responsible for interpreting and analyzing data. Almost all related companies have about 3 to 5 personnel for data interpretation. My team works scattered around the world. One geoscience expert works from New Zealand, a group processing and handling seismic waves is based in Brazil, an employee handling geochemistry is in Mexico, and the person modeling reservoirs is based in Switzerland. Only a very few employees are actually based in Houston.

-Why did Woodside withdraw?

▲Senior Researcher Kwok: Woodside first entered the East Sea deep-sea area in 2007 when there was no exploration, starting with 2D wide-area surveys for about 10 years, drilling the Jujak and Hongge wells, and conducting a small-scale 3D survey of about 500㎢. As a result, they confirmed the presence of reservoirs and source rocks. They confirmed that oil and gas were generated in the East Sea deep sea. After confirming the potential, if oil is not discovered after the 10-year exploration period, it is common for oil companies to leave. However, Woodside attempted another 10 years of exploration from 2009. They conducted exploration from March to May 2021, completed computer processing by the end of December 2021, and started interpretation from January 2022. However, in March 2022, they notified their intention to withdraw from this block. The background for withdrawal is that Woodside was already in ongoing merger discussions with BHP, an Australian resource development company. Officially, they merged with BHP in June 2022, and in July of the same year, we received their official withdrawal notice. Legally, Woodside completely withdrew from this block in January 2023. After Woodside's withdrawal, the Korea National Oil Corporation conducted a large-scale 3D survey based on past exploration data and deep-sea data explored by Woodside. This data was interpreted by Actgeo, leading to the discovery of large promising structures.

▲Consultant Abreu: Woodside had no time to conduct an in-depth analysis of exploration data due to early withdrawal. Exploration data interpretation requires a combined geophysical and geological approach, and Actgeo successfully balanced both to identify promising structures.

-What is the economic feasibility of the East Sea deep-sea gas field?

▲Lee Hohyun, Director of Energy Policy Office, Ministry of Trade, Industry and Energy: South Korea imports over $40 billion worth of gas and about $86.2 billion worth of oil annually. Having energy resources like oil and gas domestically would have a significant import substitution effect. We believe it could have a substantial impact on our national economy in the future.