Lee’s energy diplomacy mired in exaggeration

By Park Si-soo

An overseas oil development deal, which South Korea signed with the United Arab Emirates (UAE) last year and announced with great fanfare, was allegedly exaggerated, sparking doubt over the feasibility of other deals initiated in line with President Lee Myung-bak’s ambitious energy diplomacy.

In March last year, the two countries signed a memorandum of understanding (MOU) to allow Korea’s state oil firm to participate in a project that will see it secure at least 1 billion barrels of oil from Abu Dhabi oil fields. It was signed on the sideline of a summit between President Lee and his UAE counterpart Sheikh Khalifa bin Zayed Al Nahyan.

Back then, the government said the MOU had guaranteed the Korea National Oil Corporation’s right to purchase a stake in the project. It added the company had secured the right to explore for oil in three other fields with the provision that it could purchase up to a 100 percent stake in them.

Yet the auspicious news to the world’s fifth-largest crude importer was reportedly exaggerated.

Some local news media, citing unidentified sources in the Ministry of Knowledge Economy (MKE) and the state-run oil firm, reported that the MOU had been set up to “provide qualified domestic firms with the opportunity to join the project, not guarantee them the right to buy a stake.”

They added the possibility to buy up to a 100 percent stake in three oil fields was also overplayed, saying the ratio is set at 40 percent.

The government strongly denied the allegation.

Officials said the government will engage in last-minute negotiations with the UAE to finalize the development deal during the first half of the year.

“With the negotiations underway, it’s inappropriate to predict the final contract for the deal,” an MKE official said.

The Presidential Council for Future and Vision, which spearheaded the project, echoed the view.

“The country will eventually win the right to purchase a stake in the project,” an official said. “The two sides are in negotiations to narrow the gap on details.”