Ministry of Industry Holds '2nd East Sea Gas Field Strategy Meeting'
First Drilling Site Location Judged Appropriate
Production Volume-Based Profitability Improvement According to Jo Gwangryo Standards
Minister An Deokgeun: "First Drilling Planned for December as Scheduled"
The East Sea Deepwater Gas Field Technical Advisory Committee, composed of six domestic academic societies related to oil development, concluded that the government's process of deriving promising structures (geological structures presumed to contain large amounts of oil or gas) is reasonable. Accordingly, the government plans to proceed with the first drilling in the East Sea gas field as scheduled in December.
On the 25th, the Ministry of Trade, Industry and Energy held the 2nd East Sea Deepwater Gas Field Development Strategy Meeting at the Seoul Coal Hall, chaired by Minister Ahn Deok-geun, with participation from related ministries, national research institutes, affiliated academic societies, resource public enterprises, and private companies to review the drilling plan, improvements to the royalty system, and progress on investment attraction.
This strategy meeting was held three months after the last one in June. On this day, the Ministry of Trade, Industry and Energy discussed technical matters related to drilling and plans for reforming the royalty system, which had been reviewed by two advisory committees on technology and system improvement.
The Technical Advisory Committee evaluated the East Sea deepwater gas field technology and concluded that ▲the derivation of promising structures was generally conducted reasonably, ▲the location tentatively selected by the Korea National Oil Corporation for the first well drilling is appropriate, and ▲after the first well drilling, detailed analysis should be conducted to increase the success rate of subsequent drilling.
The Technical Advisory Committee consists of 12 members recommended by six academic societies: the Korean Society of Mineral and Environmental Geology, the Geological Society of Korea, the Korean Society of Petroleum Engineering, the Korean Society of Petroleum Geology and Sedimentology, the Korean Society of Resources Engineering, and the Korean Society of Geophysics and Physical Exploration. The Korea National Oil Corporation plans to prepare the first well drilling plan reflecting the advisory committee's review results and request approval from the Ministry of Trade, Industry and Energy at least one month before drilling.
Previously, the government announced that up to 14 billion barrels of oil and natural gas are estimated to be contained in seven promising structures of the East Sea deepwater gas field. It is known that the government plans to first drill a well in the 'Daewanggorae' structure among the promising structures to confirm the possibility of oil deposits.
The System Improvement Advisory Committee, composed of seven members from academia, research institutes, and law firms, proposed ▲improving the royalty rate (the money paid to the government for extracting minerals) from the current production volume-based method to a method proportional to the profitability of companies, to fairly distribute profits between companies and the government.
Additionally, ▲they proposed imposing additional royalties (special royalties) during periods of high oil prices and ▲mandating companies to accumulate restoration costs annually from a certain point, considering their obligation to restore the site after production ends. Currently, foreign companies developing resources in the East Sea pay a maximum of 12% in royalties, raising concerns about national wealth outflow. The government plans to finalize the royalty system reform plan reflecting the advisory committee's review results and revise the Enforcement Decree of the Submarine Mineral Resources Development Act for legislative notice.
Regarding investment attraction, the Korea National Oil Corporation is conducting investment briefings targeting global major companies and plans to select advisory firms in October to begin full-scale investment attraction activities. Minister Ahn Deok-geun said, "We will do our best to ensure the first well drilling proceeds smoothly in December this year and to complete system improvements such as royalty reform within the year, leading to investment attraction by promising companies."
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