Multiple Foreign Companies Join Bidding
Preferred Negotiator Selection Process Begins
Lack of Economic Viability Concluded... Project Resumption Remains Uncertain
The "Daewang Whale Project," a deep-sea gas field development in the East Sea that had been on the verge of being scrapped, has entered a new phase as the possibility of foreign capital participation has been confirmed.
According to Korea National Oil Corporation (KNOC) on September 21, multiple foreign companies participated in the bidding for equity investment in the East Sea offshore block, which closed on September 19. The bidding, originally announced in March, had its deadline extended by three months at the request of some potential investors.
KNOC, together with its advisor S&P Global, will evaluate the bidding proposals and, if a suitable investor is found, select a preferred negotiating partner. After detailed negotiations, the company plans to proceed with the signing of a joint operating agreement. However, to ensure a fair evaluation among the participants, the specific names of the companies involved have not been disclosed.
The key to restarting the project lies in the "willingness to invest" of both the government and KNOC. Under current regulations, foreign investors are limited to holding approximately 49% of the equity, meaning KNOC must secure a majority stake. If production is successful, the government's royalty share will be set at up to 33%, and the rights may be maintained for up to 30 years.
Additionally, minimum work and expenditure obligations are imposed at each stage, making it inevitable for KNOC and the government to inject budgetary funds if the project resumes. However, since the Daewang Whale structure has already been deemed "not economically viable," there are doubts as to whether the government will continue to invest substantial public funds in the project.
Previously, in February, KNOC drilled the Daewang Whale structure and sent the obtained samples to Core Laboratories, a global specialist firm, for detailed analysis over about six months (from late February to late August). The analysis showed that the subsurface properties-such as a sandstone layer thickness of about 70 meters, a cap rock of about 270 meters, and a porosity of 31%-were generally favorable. However, no commercially recoverable gas was found. As a result, the Daewang Whale structure was ultimately confirmed to lack economic viability, and further exploration has been abandoned.
It is reported that approximately 126.3 billion won has been invested in the Daewang Whale Project to date. During the administration of President Yoon Suk-yeol, 49.7 billion won was allocated for drilling exploration in the Ulleung Basin of the East Sea in the 2025 budget proposal, but the entire amount was cut during the National Assembly's review. Furthermore, the recently submitted budget proposal for the next year did not allocate any funds for related projects, making it unlikely that the Lee Jaemyung administration will inject additional public finances to continue the project.
KNOC stated, "Based on the data accumulated through previous exploration and drilling, if investment is secured, we will develop a new business plan together with our joint operating partners," adding, "We will do our utmost to contribute to strengthening the nation’s resource security."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
