ABU DHABI // South Korea struck an historic deal with Abu Dhabi yesterday to explore for oil in areas covering 10 per cent of the emirate’s landmass.
Abu Dhabi National Oil Company (Adnoc) signed a contract with Korea National Oil Corporation (KNOC) and Seoul’s GS Energy to create a joint-venture company that plans to begin pumping oil within two years.
It is the latest in a string of strategic deals between Seoul and Abu Dhabi, from a US$20 billion nuclear power plant to military training to industrial construction.
“South Korea has really been able to build a strong, close relationship with Abu Dhabi,” said Samuel Ciszuk, a consultant with KBC Energy Economics. “This is clearly a very strategic deal and it’s all connected in a bigger way.”
The 30-year agreement for two onshore blocks and one offshore makes South Korea the seventh foreign nation to develop Abu Dhabi crude, a business historically dominated by the western majors. The area to be explored covers 11,560 sq km and contains an estimated 570 million barrels of oil.
South Korea’s relationship with Abu Dhabi came into the spotlight in 2009 when Seoul beat French, American and Japanese competitors to win a contract to build four nuclear reactors. Since then the two nations have expanded cooperation to military training, oil storage and now crude exploration.
Under the agreement, South Korea will have the right to all the oil produced from the three fields in the event of a supply emergency.
“This country has many natural resources,” said Dr. Seong Hoon Kim, the chief operating officer of KNOC. “We don’t have any natural resources but very modern high technology. If we combine together, it will be a very good combination for both countries.”
The fields included in yesterday’s contract are expected to produce 43,000 barrels of oil a day by 2014. KNOC will own 34 per cent of the venture, GS Energy 6 per cent and Adnoc the remaining 60 per cent.
Some of the fields were discovered by Adnoc as far back as the 1970s. “At that time it was not big enough to develop,” said Dr Kim. “But at the current oil price it’s worthwhile to develop so we’ll bring all the technology to make the project successful and try to find additional oil.”