The state-run Korea National Oil Corporation (KNOC), which is leading the effort, is now scrambling to secure foreign investments to sustain further exploration.
President Yoon Suk Yeol had touted the project as potentially holding up to 14 billion barrels of oil and gas reserves. However, the venture suffered a major setback when its first drilling operation - costing approximately 100 billion won ($68.5 million) - failed to yield economically viable results.
The debt-laden company, burdened with 19.6 trillion won in liabilities, must now seek alternative financing, either through foreign investments, which it confirmed plans to pursue in March, or through corporate bond issuance.
The Ministry of Trade, Industry and Energy defended the project’s prospects on Saturday, emphasizing the necessity for additional drilling at six other promising sites, despite each requiring an investment of 100 billion won.
The ministry argued that successful gas development would generate broader economic benefits beyond project profitability, including improved trade balance, value-added creation, and enhanced industrial competitiveness.
Drawing on past success, officials cited the East Sea gas field, which operated until 2021. That project generated sales of 3.1 trillion won after an initial investment of 1.3 trillion won, including drilling costs, while also contributing to government revenue through taxes and royalties.
“This is just the first step. The next phase can proceed with more reliable data at hand,” said Lim Jong-sei, a professor of energy resources and engineering at Korea Maritime and Ocean University.
While the ministry indicated that multiple foreign firms have expressed interest in the project, industry experts caution that a heavy reliance on foreign investment could significantly diminish South Korea’s share of any future development profits.
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