Donghae-1 natural gas field

The Donghae-1 natural gas field, 58 kilometers offshore from Ulsan. / Courtesy of KNOC

By Park Jin-hai

Flying for about an hour by helicopter, a 48 meter production facility in the middle of the East Sea comes into sight. The workers at Donghae-1 natural gas field, 58 kilometers offshore from Ulsan, are drilling for gas and ultra-light crude.

The offshore commercial production field, discovered in 1998 in the Ulleung Basin, feed Korea's oil dreams with its extensive continental shelf that might hold great reserves of oil and gas.

"We are succeeding in producing commercial gas and condensate after the Netherlands-based Shell failed at oil exploration here in the 1970s. With the Donghae-1 gas field, we became the 95th oil producing country in the world," said Kim Tae-jin, senior manager of the Ulsan Gas Production Office at the Korea National Oil Corporation.

The KNOC drilled 10 wells from 1983 through 1995 in Block 6-1, named Donghae-1, in the East Sea, and found gas in five wells.

The discovery found recoverable reserves estimated at 186 billion cubic feet of natural gas and 3.2 million barrels of ultra –light crude oil about 60 kilometers southeast offshore from Ulsan.

Donghae-1 natural gas field

When the helicopter arrived at the field , a total of 21 KNOC employees were working on the floating station, pumping out gas and oil from four of the five underwater wells. From there, they pumped the gas and oil to the refinery on land.

"The natural gas pumped out of the Donghae-1 gas field is clean, sulfur-free gas that generates lots of energy with little refining, emitting very little air pollution. The crude oil pumped out with the natural gas is an extra-hard concentrate," said Koo Ja-hag, production supervisor of Donghae-1 gas field, as he looked down at the seven computer screens that control and oversee the offshore facility.

The Donghae-1 gas field produces up to 50 million cubic feet of natural gas and 1,000 barrels of crude oil a day, enough to run 340,000 households and operate 20,000 cars.

Korea imported nearly 2.5 million barrels of crude oil and condensate, making it the fifth-largest importer of oil in the world in 2014.

The nation is highly dependent on the Middle East for its oil and that region accounted for more than 84 percent Korea's 2014 crude oil imports, according to Korea customs statistics.

To be less dependent on foreign energy imports and reduce volatility from oil supply disruptions and price fluctuations, Korea has begun domestic and overseas exploration activities.

Since exploration began in the 1970s, Korea has discovered one commercially producing field among the Ulleung Basin, Yellow Basin, and Jeju Basin so far. Although natural gas production from Donghae-1 began in November 2004, oil production did not begin until 2010 after further exploration and discovery.

The development of the Donghae-1 gas field wrapped up in November 2008. It is currently hooked up to existing production facilities to generate natural gas and crude oil, and it contributes to the economy by generating up to $1.75 billion, jobs for 35,000 people and added value of 2 trillion won because the nation produces this energy rather than imports it.

"It took 32 years from when Shell's first exploration took place, and 16 years from when the KNOC's exploration began commercial production in 2004," Kim said.

With the development of the Donghae-1 gas field, Korea became the 95th country to produce oil, thereby gaining recognition for its technical capacity.

Currently, the total production from the four wells has been cut back to 30 percent of its peak and those wells are scheduled to be shut down by 2019. The company produced a total of 165 billion cubic feet of natural gas and 3.15 million barrels of ultra-light crude from the field as of August, 2015.

The Donghae-1 gas field was previously planned to be shut by next year, but by discovering the Donghae-2 gas field 5.4 kilometers southwest of the Donghae-1 gas field, with an additional 22 billion cubic feet of natural gas and 190,000 barrels of crude oil in its reservoir, its life has been extended three years to 2019.

The Donghea-2 gas field will start its production beginning next year and last until 2019, for which the Donghea-1 gas field's offshore platform and land terminal will be used.

"It is important to develop local gas fields even if the production size is meager. In overseas exploration, although we have found very good reservoirs, we should give half the development profits to producing countries in the form of taxes and facility maintenance expenses. Through constant local development projects here, we should build up expertise and profits," said Kim Myung-hoon, vice president of the management support department at KNOC.

The continental shelf exploration project entails the exploration of three sedimentary basins _ the East Korea Sea (Ulleung) basin, the West Korea Bay Basin and the the Jeju basin. At the Ulleung Basin, a number of promising geological structures have shown high favorability for the occurrence of oil and gas.

"The favorability of oil and gas prospects in the West Korea Bay and Jeju basins are also high, considering the neighboring areas, which have geological structures similar to that of the Bohai Bay gas field, Subei basin and the Pinghu gas field, which are all producing oil and gas," said Kim.

As emerging powers like China and India, as well as developed countries, focus on oil procurement, oil resources are becoming more important in securing national competitiveness.

Korea's oil dependence is very high, but it imports most of its oil and gas from the top five oil-exporting countries. Therefore, independent oil development and extraction, which are directly linked to national security, along with domestic continental shelf exploration projects, are crucial.

Korea's oil dependence on the Middle East exceeds 80 percent, but the circumstances in the Middle East have high potential for instability, and if Korea increases its dependence on crude oil imports from that region, it will weaken Korea's oil supply structure and hike transport costs. Domestic exploration projects are essential to keep transport costs reasonable and stabilize our oil supply.

As resource nationalism gains force and spreads in oil-producing countries, overseas oil development projects are becoming more difficult for local oil companies to do. "For the stable procurement and supply of oil, we should continuously try to find the wells with great potential on the local continental shelf. The local oil development businesses will ensure it is 100 percent profitable for Korea's companies and its government. Further, it will vitalize relevant local industries like the Offshore Plants, Floating Production Storage and Offloading systems and Pipelines and strengthen the industries' global competitiveness," Kim said.