[The Editors' Verdict] The Weight of the President's Remarks

A Massive Oil and Gas Discovery in Yeongilman, Pohang
Economic Opportunity Undermined by Political Strife

"It has been found that there is a very high possibility that up to 14 billion barrels (in oil equivalent) of oil and gas are deposited in the Yeongilman oil and gas field off Pohang, and this has been verified by leading research institutions and experts."

President Yoon Suk-yeol delivered a message of hope to the entire nation during his first national briefing since taking office on the 3rd of this month. Just one day after receiving a report from relevant ministries indicating a high possibility of a massive amount of oil and gas deposits in the sea off Pohang, Gyeongbuk Province, he hurriedly appeared at the national briefing himself. This represents natural gas that can be used by the public for up to 30 years and oil that can be used for four years. It gave hope that resource-poor South Korea, which has relied on imports for oil and gas, could rise to the ranks of oil-producing countries.

This is the first time President Yoon has explained current issues in the form of a national briefing since his inauguration. It likely reflects his strong desire to give hope to citizens weary from high inflation and economic instability, even if there is only a 20% chance of becoming an oil-producing country.

The Ministry of Trade, Industry and Energy estimated that the maximum potential reserves of 14 billion barrels of oil and gas, when converted into value, amount to about 5 times the market capitalization of Samsung Electronics, which ranges between 440 trillion and 450 trillion won. This figure, reaching up to 2,200 trillion won, is comparable to South Korea’s annual gross domestic product (GDP). If successful, it could lead not only to energy self-sufficiency in oil and gas, which currently have high import dependency, but also to exports.

The cost required for drilling one promising structure (an area with high potential reserves) is about 100 billion won. Based on the analysis results from Actgeo, a U.S. company that analyzed the potential for oil and gas deposits in the East Sea, the government estimates the development success probability of one deep-sea promising structure at about 20%, and believes that at least five drilling explorations should be conducted with an investment of over 500 billion won.

Due to the enormous costs from the drilling stage, it is impossible for Korea National Oil Corporation, which is in a capital deficit state with debts (about 20 trillion won) exceeding its capital, to handle this alone. To convert potential deposits into actual resources, a massive government budget is required. Agreement between ruling and opposition parties to secure the budget is essential.

However, the reality is moving in the opposite direction. After President Yoon’s national briefing, the opposition parties have poured cold water on the possibility of massive oil and gas deposits off Pohang. Within the Democratic Party, there is strong distrust regarding the appropriateness of Actgeo’s selection, the bidding process, business feasibility evaluation results, lists of domestic and international advisory groups, meeting minutes, and final reports from the Ministry of Trade, Industry and Energy and the Korea National Oil Corporation. Even the Democratic Party’s Pohang Buk-gu district committee chairperson mentioned the possibility of earthquakes occurring during drilling operations due to the characteristics of the Yeongilman fault structure. This has touched on the sensitivities of Pohang residents, who are still traumatized by the Pohang earthquake in November 2017.

President Yoon seems to have forgotten the reality of South Korea, where fierce political conflicts between ruling and opposition parties persist over the formation of the 22nd National Assembly. The gap between the parties has deepened to the extent that special investigations into First Lady Kim Keon-hee and Chae Sang-byung, and even impeachment of President Yoon, have been discussed. The opposition’s immediate reaction to anything from President Yoon is to oppose it first. The issue of oil and gas deposits in Yeongilman off Pohang is no exception.

What if the Ministry of Trade, Industry and Energy had calmly and thoroughly prepared and announced the facts about the oil and gas deposits instead of President Yoon speaking directly? At least at this moment, when the long-awaited possibility of becoming an oil-producing country has just begun to open, the current situation filled with nitpicking could have been different. It is regrettable that a clearly economically beneficial possibility has been reduced to a political battleground full of loopholes.