East Sea gas field faces budget hurdles ahead of initial drilling

Vitor Abreu, owner of the U.S.-based geoscience research company Act-Geo, attends a press conference at Government Complex in Sejong, Friday. Yonhap

The government's ambitious project to excavate oil and gas in the East Sea is expected to face challenges in securing a budget from the National Assembly, according to sources, Sunday.

While the government aims to allocate a budget of 100 billion won ($72.4 million) next year for initial drilling, the main opposition Democratic Party of Korea (DPK) is putting on the brakes, first demanding the transparent disclosure of relevant information regarding the project.

According to the government, a budget of 100 billion won is needed for drilling one prospective structure. Its goal is to commence initial exploratory deepwater drilling within the first half of the 2025, following sequential exploratory drilling of the four remaining prospective structures.

For next year, following the usual practice, the government plans to cover approximately 50 percent of the total project cost, or 50 billion won, through the Korea National Oil Corp. (KNOC). The remaining 50 percent will be provided as government loans to KNOC.

Given the significant investment and technical expertise required for deepwater development, the government plans to start attracting external investments in 2025.

As KNOC is in a state of complete capital erosion, receiving government financial support and attracting external investment is crucial to the project.

However, it remains uncertain whether they can obtain the consent of the National Assembly which can cut budget proposals.

The DPK, which holds the majority in the Assembly, is questioning whether it is appropriate to select the U.S.-based geoscience research company Act-Geo to conduct research. They also want to know how the discussions between the presidential office and the Ministry of Trade, Industry and Energy went, which led to the announcement of the plan directly by President Yoon Suk Yeol.

"Drilling five structures is the minimum. Typically, 10 structures are drilled (in projects like this), making this a 1.2 trillion won project," Rep. Chung Chin-ook from the DPK said during a radio interview with broadcaster SBS, Friday.

"Is it really feasible to entrust such a small company, almost a one-person enterprise, with a project worth 1.2 trillion won?" Chung said. "Is there really a need to rush this much?"

Fifteen DPK lawmakers who were recently nominated to the National Assembly's Trade, Industry, Energy, SMEs, and Startups Committee also held a press meeting on Friday, vowing to examine every suspicion regarding the project.

"The trade ministry and the KNOC have refused to submit key documents, including those related to the appropriateness of Act-Geo's selection, the bidding process, project feasibility evaluation results, the list of domestic and international advisory panels, meeting minutes and final reports," the lawmakers said.

They stated that a review of relevant documents submitted by the government is needed before determining the appropriateness of the proposed budget.

The ruling People Power Party refuted the claims, saying the DPK is objecting for political purposes.