Nam Hyun-woo has worked as a staff writer at The Korea Times since 2013, mostly covering business and politics. He currently belongs to the Business Desk where he covers topics such as emerging tech, AI, ICT and Korea's chaebol community. Prior to joining the team, he was the paper's correspondent for the presidential office of Korea during the Yoon Suk Yeol and Moon Jae-in administrations.
Yoon's resource exploration project in peril amid martial law fiasco
President Yoon Suk Yeol speaks on a government project to explore gas and oil reserves in the East Sea during a televised briefing at the presidential office in Yongsan District, Seoul, June 3. Korea Times file
By Nam Hyun-woo
Economic initiatives feared to lose momentum
Major economic initiatives including President Yoon Suk Yeol’s flagship gas and oil exploration project in the East Sea are at risk of running aground due to the president’s abrupt declaration of martial law, which caused serious political unrest in the country before being reversed six hours later.
Shares related to the projects are tumbling as investors unload their holdings, fearing the project's sustainability, which has already been questioned due to doubts about the presence of gas and oil reserves.
Given that Korea’s opposition parties having already slashed the national budget allocated to the project and the project’s operator facing capital impairment, chances are high that the project may be scrapped, depending on President Yoon's political fate.
According to industry officials, the West Capella deepwater drillship, operated by the project’s drilling contractor Norway’s Seadrill, will arrive in Busan soon.
Once the replenishing vessels accompanying the West Capella finish loading supplies in Busan, they will move to the waters off Pohang and Ulsan, where President Yoon mentioned in June during a televised briefing that there is “a high possibility that a massive amount of oil and gas is buried” in that area.
Seen is the Donghae-1 gas field platform in the East Sea, which began operations in 2004 and ended in 2021. Courtesy of Korea National Oil Corp.
Initially, the government planned to conduct the first phase of drilling in the deep waters off Pohang's Yeongil Bay, allocating 50.6 billion won from the national budget and an additional 50 billion won from the project’s operator Korea National Oil Corp. (KNOC).
However, the main opposition Democratic Party of Korea (DPK), which controls 170 of 300 seats in the National Assembly, unilaterally passed a revised national budget on Nov. 29, slashing the 50.6 billion national budget allocated for the project by 98 percent to 837 million won.
After the cut, the government had been urging the DPK to reinstate the slashed budget, with First Vice Minister of Trade, Industry and Energy Park Sung-taek calling it “a declaration to give up the country’s energy security.”
However, as the president declared martial law and lifted it just six hours later, citing the budget cut among other issues, all political debates have shifted focus to Yoon's political fate. Opposition parties are now pushing negotiations related to the project on the back burner.
If the negotiations fail, KNOC has to secure 50 billion won of funds to cover the budget cut. However, it has been in a status of capital impairment since 2020, with liabilities amounting to 19.6 trillion won and negative equity of 1.3 trillion won.
Reflecting these uncertainties, shares related to the projects have been faltering since the martial law fiasco. The Korea Gas Corp.'s share price nosedived by 18.75 percent on Wednesday, and suffered another 6.64 percent drop on Friday. POSCO International, an energy trader, also tumbled by 12.62 percent on Wednesday and inched down by 0.25 percent on Friday.
Along with the exploration project, the Yoon administration’s flagship economic initiatives such as nuclear reactor exports to the Czech Republic and pension reform are all facing setbacks, as the administration’s sustainability is now being questioned.
The industry ministry released a statement on Friday stressing that it will “spare no efforts to keep the East Sea project and nuclear reactor export projects intact.” However, it did not explain any further, as the National Assembly was poised to vote on an impeachment motion on Yoon.