Secured 85% Stake Including Operating Rights of Ketapu Block in Malaysia
SK Earth On, a subsidiary of SK Innovation specializing in energy resource development, has secured the operating rights for the 'Ketapu Cluster' located offshore in Sarawak, Malaysia.
On the 8th, SK Earth On announced that after winning the bid for the Ketapu Cluster from the Malaysian government, it signed a production sharing contract with Petronas, Malaysia's national oil company. Under the contract, SK Earth On holds 85% of the operating rights and equity in the Ketapu Cluster, while the remaining 15% equity is held by PSEP (Petroleum Sarawak Exploration and Production Sdn Bhd), an oil development company owned by the Sarawak state government.
The production sharing contract is a common form of concession agreement used in major oil-producing countries in Asia. The contractor bears the costs and risks associated with exploration and development, and when oil and gas are produced, the production is shared between the local government and the contractor according to a pre-agreed ratio.
The Ketapu Cluster refers to four undeveloped areas confirmed to have oil and gas reserves. It is located within the SK427 block area, for which SK Earth On secured operating rights in April 2022. SK Earth On plans to link exploration efforts between the Ketapu Cluster and the SK427 block starting next year to increase the chances of successful development.
Current status of exploration/development/production blocks in Southeast Asia by SK Earth On. Photo by SK Earth On
The Ketapu Cluster and SK427 block are known to have higher business viability compared to the 17/03 block in the South China Sea, which began production last year and is expected to generate operating profits of approximately 250 billion KRW this year alone (with reserves of about 500 million barrels). Considering the verification of development feasibility and development stages, production is expected to start in 2031, enabling full-scale profit generation.
Leveraging its international energy resource development technology and block operation capabilities, SK Earth On has established a solid presence in China and Southeast Asia, as demonstrated by its success in the South China Sea 17/03 block?where it independently achieved exploration through production for the first time last year?and the discovery of oil during the exploration phase in the Vietnam 16-2 block, as well as the two Malaysian blocks.
SK Earth On’s achievements are reflected in SK Innovation’s performance. In the first half of this year, with the full impact of the South China Sea 17/03 block’s results, SK Innovation’s energy resource development business recorded sales of 742 billion KRW and operating profit of 296.5 billion KRW. The first half operating profit accounts for about 80% of last year’s total operating profit, highlighting SK Earth On’s resource development business as a significant cash cow for SK Innovation.
Yearly Performance Trends of SK Innovation's Energy Resource Development Business. Photo by SK Earth On
Myungseong, President of SK Earth On, stated, “As the first private domestic company to enter the overseas resource development market, SK Earth On has secured the operating rights for the Ketapu Cluster by leveraging the technology and capabilities accumulated over the past 40 years. We will establish a unique position in Southeast Asia and further grow into a leading energy resource development company representing the Asian region.”
Meanwhile, since entering the energy resource development business in 1983, SK Innovation currently participates in 10 blocks across 8 countries and 3 LNG projects, producing approximately 57,000 barrels of oil equivalent per day of oil and gas.
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