Oil Prospect Found by Tiny Firm Spurs Hope, Doubt in Korea

Heesu Lee
Wed, Jun 12, 2024

(Bloomberg) -- Vitor Abreu is a geologist, but he arrived in Seoul last week like a star, greeted at the airport by flashing cameras and a hoard of reporters.

The head of a 14-person consultancy — headquartered in his suburban Houston home — had discovered what could become one of the world’s biggest oil and gas deposits off the coast of South Korea, spurring hopes of an energy windfall even as skeptics raised questions. His firm found a prospective area, which still required full-fledged drilling to prove its size and viability.

Announced by President Yoon Suk Yeol in a televised speech, the potential find has gripped a nation struggling with costly fuel imports, underscoring the extent to which energy security has become a priority globally, even if it means tapping fossil fuels that might set back climate goals for decades.

South Korea aims to lift the share of renewables in its power mix to almost a third by 2038 from just 9% in 2022, and make nuclear its largest source of electricity generation, according to a government proposal. The use of fossil fuels — which currently dominate the energy mix — is meant to plunge over that timeline.

Still, the government has been enthusiastic about the potential hydrocarbons at stake. The president touted the field as holding as much as 14 billion barrels equivalent of resources, enough for four years of oil consumption, and 29 years of gas demand in the country. The announcement sent local oil and gas shares soaring and was trending on social media for days.

That’s despite the fact that the field, if successful, would take seven to 10 years to come online, and would still be producing oil and gas well after 2050, the year by which South Korea aims to be carbon neutral.

Abreu has sought to manage expectations. While the basin off the country’s southeastern coast held “great potential,” there was only a 20% chance it would yield fuel during exploration, he said, a rate that’s considered the industry norm, according to independent experts.

“It’s still risky,” the Brazilian scientist said at a press briefing on Friday. “There’s an 80% chance they do not work.”

Doubts Swirling

Any success from the Houston outfit would come after years of disappointment in Korea for much larger players.

After jointly exploring the same region with Korea National Oil Corp. for about 15 years, Woodside Energy Ltd. pulled out of the project last year, saying in its annual report the area was “no longer considered prospective.”

Abreu’s firm ACT-Geo bid for and won KNOC’s offer to jointly continue the assessment in 2023. President Yoon hailed ACT-Geo as a “world-class deepwater technology evaluation company,” though few in the local industry had heard of it. South Korean media also queried its track record.

The bespectacled geologist told reporters his consulting firm, which he describes as niche, had recently opened another office in London, which is also located at a personal residence. The Korean government, meanwhile, highlighted his doctorate from Houston’s Rice University and his experience leading exploration at Exxon Mobil Corp.

“The (president’s) press conference raised a lot of questions for the Korean people,” Abreu said. “So then I came here to actually give a more clear response to the Korean people on this very important project.”

Suraya Tulot, a senior upstream analyst at Welligence Energy Analytics, said it’s possible ACT-Geo could have unearthed new structures, complementing the work previously undertaken by Woodside and KNOC.

“You can come up with a lot of theories, but theories will not be proven until you drill the wells,” she said.

Opposition politicians in Korea have accused Yoon, who has approved drilling to start before the end of the year, of jumping the gun in announcing the discovery. With results of the exploration due in early 2025, and any production to start over the next decade, certainty is years away.

The main opposition party said in a statement that Koreans “cannot tolerate a shred of doubt” over the project’s viability as it will likely cost an “astronomical amount of taxpayers’ money.”

“It’ll take years for us to know whether the reserve is commercially viable,” said Kim Sungwhan, a lawmaker from the opposition Democratic Party.

--With assistance from Stephen Stapczynski.