Gov't to request state audit of controversial East Sea gas development project

A drillship named West Capella conducts a drilling operation in the East Sea, Dec. 18, 2024, to check an oil and gas prospect in the ocean. Newsis

The Ministry of Trade, Industry and Resources said Wednesday it has decided to ask the state auditor to look into controversies surrounding a gas field development project in the East Sea by the Korea National Oil Corp. (KNOC), including its selection of a U.S.-based geoscience consulting firm that many believed was not qualified to work as an advisory firm.

Industry Minister Kim Jung-kwan has ordered the ministry to ask the Board of Audit and Inspection (BAI) to look into why the KNOC selected the U.S. firm, Act-Geo, and why it had canceled a seismic safety review for exploratory drilling in the East Sea gas prospect, according to his office.

The move comes after lawmakers raised concerns over Act-Geo's credibility and other allegations.

The ministry said it also plans to ask the BAI to investigate the promotion of KNOC executives responsible for the project, despite the results of the first exploratory drilling that offered no proof of economic feasibility of the project.

The former Yoon Suk Yeol administration announced in 2024 the potential discovery of seven oil and gas reserves in waters off the coast of Yeongil Bay in Pohang, North Gyeongsang Province, citing Act-Geo's study.

In the study, Act-Geo estimated that the deposits could hold between 3.5 billion and 14 billion barrels of gas and oil.

But the results of the first exploratory drilling into one of the reserves, called the Blue Whale prospect, showed it held no economic feasibility, with the prospect found to have no retrievable amount of gas.

Despite such results, the KNOC recently closed international bidding to select its overseas partner for the project, with at least two foreign companies participating in the bid. British oil major BP and U.S.-based ExxonMobil appear to be among the bidders, according to industry sources.

The KNOC has said it plans to select a preferred bidder among the applicants after reviewing their proposals through S&P Global, and newly establish a business plan for the project with its new partner.