▲The drillship ‘West Capella’ is stationed at the ‘Blue Whale’ drilling location in the deep waters offshore Korea’s east coast, making final positioning adjustments. (Photo: KNOC)
Korea National Oil Corporation (KNOC) has decided to withdraw from its Senegal offshore block project, concluding its involvement after joining in 2020.
Industry sources confirmed on December 31 that KNOC’s board of directors approved the “Senegal UDO Block Project Withdrawal Plan” during a board meeting held late last year. The project involved exploration activities in the UDO Block offshore Senegal, covering an area of 10,016 square kilometers. If commercially successful, the project would have granted development and production rights for 25 years. The project was initially planned to continue until February 2028, spanning a period of 7 years and 7 months.
KNOC participated in the project through a Production Sharing Contract (PSC), holding a 20% stake. Total, serving as the project operator, held a 70% interest, while Senegal’s national oil company, Petrosen, maintained a 10% stake. KNOC had initially expected to secure economically viable quantities of gas and condensate upon successful exploration. The company had also anticipated strengthening its deepwater exploration capabilities through collaboration with Total and expanding its exploration activities into other regions.
However, following a comprehensive evaluation, KNOC determined that the project lacked economic feasibility, leading to its decision to withdraw.
Industry observers had previously pointed out that the UDO Block exploration project had not attracted significant international interest, with relatively low competition during the bidding process. This circumstance allowed KNOC to participate without paying a substantial premium.
This year has seen an increased focus on domestic oil field development funding. According to the National Assembly Budget Office’s “2023 Fiscal Year Analysis Report,” funding for domestic oil field development increased significantly to 33 billion KRW, representing more than a 3.5-fold increase from the previous year’s allocation of 9.2 billion KRW. In contrast, overseas oil field development funding, which includes equity investments and exploration drilling, decreased to 6.3 billion KRW from last year’s 18 billion KRW. This reduction was primarily due to the elimination of a 14.5 billion KRW budget previously allocated for acquiring overseas oil field equity.
A significant domestic project currently in progress is the East Sea deepwater gas field exploration, known as the “Blue Whale Project.” This initiative aims to develop oil and gas reserves valued between a minimum of $3.5 billion and a maximum of $14 billion, with an exploration success rate of approximately 20%. The first exploration drilling began on December 20. The drilling process is expected to continue for 40-50 days, after which the data collected during drilling will be analyzed, with initial results planned for announcement in the first half of next year.
