[2024 National Audit] Korea National Oil Corporation's 'Deep Sea Gas Field Project' Under Scrutiny... Lee Eon-ju "184 Billion Won Lost in Drilling Investment"

The National Assembly's Industry, Trade, Energy, Small and Medium Enterprises Committee engaged in a heated debate on the 17th over the feasibility of the East Sea deep-sea gas field project, known as the Korea National Oil Corporation's (KNOC) 'Great Whale Project.' The opposition party argued that a preliminary feasibility study and a thorough review of the project's prospects should be conducted ahead of KNOC's first drilling, while the corporation maintained its assessment that the project has high potential.

On the same day, the committee held a hearing in Ulsan on 12 agencies under the Ministry of Trade, Industry and Energy, including KNOC and Korea Gas Corporation. Lee Eon-ju, a member of the Democratic Party, pointed out during the KNOC audit that "KNOC has been in a capital erosion state for five years, with annual interest expenses approaching 500 billion KRW, and lost 184 billion KRW in investments due to failed drilling at Jujak, Hongge, and Bangeo sites."

Lee explained, "According to the annual report evaluation of KNOC's Block 8 and Block 6-1 northern areas, there are many negative aspects such as 'high exploration risk, insufficient exploration resources, and unsuitability as drilling targets.' I do not understand the reason for commissioning a comprehensive technical evaluation to Actgeo since December 2022."

She added, "On November 29 last year, an expert advisory opinion on Actgeo's evaluation was released, which contained many negative views, such as 'insufficient demonstration of elasticity and exploration data processing results' regarding the possibility of hydrocarbon deposits in the East Sea Ulleung Basin deep-sea sedimentary body proposed by Actgeo." Lee questioned, "If this advisory opinion was received, verification should have been conducted, but additional work was again commissioned to Actgeo. Is this a rational decision?"

[Image source=Yonhap News]

In response, Kim Dong-seop, President of KNOC, said, "Because the project is high-risk, high-return, there are some negative opinions," but added, "Overall, I understand that the opinion received was that the project has very high potential and should continue."

KNOC's uncooperative attitude during the audit also came under scrutiny. Standing committee members requested data disclosure from KNOC, but submissions were deemed insufficient. President Kim explained, "We received 551 requested data items. This corresponds to an average of 32 years and 4 months' worth of data that the relevant department can handle."

During the Korea Gas Corporation audit, the increasing amount of overdue receivables became a controversy. Park Sang-woong, a member of the People Power Party, questioned the gas corporation about overdue receivables and interest, to which Choi Yeon-hye, President of Korea Gas Corporation, responded, "Annual interest is 1.7 trillion KRW, daily interest is 4.6 billion KRW, and interest due to overdue receivables alone is 1.2 billion KRW."

President Choi explained, "The total amount of overdue receivables is expected to exceed 14 trillion KRW by the end of this year," adding, "From the initial basic design, not a single won of profit has been added, so it is not a profit-making structure." She further stated that it is difficult for the gas corporation to resolve such a large scale of overdue receivables on its own.

Korea Gas Corporation recorded a net profit of 660.2 billion KRW in the first half of this year, but overdue receivables for civilian use reached 13.7 trillion KRW. The total overdue amount, including power generation receivables, amounted to 15.3645 trillion KRW.

[Image source=Yonhap News]

This content was produced with the assistance of AI translation services.