Koreans plan major upstream investment

11 November 2005
State-run Korea National Oil Corporation (KNOC) plans to invest a total of at least $800 million in the development and production of crude oil and gas from four oil blocks in Yemen, as part of the company's regional strategy. 'Data interpretation is under way and depending on exploration and spudding, total investments may increase to $1,000 million. They [investments] will be made by KNOC, along with [private] Korean investors,' says Jin Seok Kim, vice-president of exploration and production, without identifying potential investors.

KNOC has already signed production sharing agreements (PSAs) with the Petroleum Exploration & Production Authority (PEPA), part of the Oil & Mineral Resources Ministry, for three blocks - 16, 30 and 70. 'We are in exclusive negotiations for [block] 4 and expect to sign a final agreement by December.'

Blocks 4, 39 and 70 are onshore concessions, located near Marib, while block 16 is offshore, southeast of Sanaa. Block 16 is estimated to have the highest reserves of 1,000 million barrels, followed by blocks 39 and 70 at 500 million barrels and 250 million barrels at block 4. KNOC has the right to book the oil reserves under the PSAs it signed with PEPA. KNOC has a 65 per cent interest in block 70 and 50 per cent each in blocks 39, 4 and 16. The remaining shares are held by several unidentified private Korean investors.

Under its drilling programme, exploration is due to start by January at all four concessions, with first production planned from block 4 by the third quarter of 2006. 'It is too early to predict any flows [production of crude oil], but based on the data in hand we estimate an initial rate of at least 50,000 barrels [a day] from block 4,' Kim says.

KNOC has other regional interests and is preparing to submit bids on 1 January to the Oil & Gas Ministry in Oman for five blocks in acreage recently relinquished by Petroleum Development Oman (PDO - MEED 19:8:05).

In Iraq, KNOC is awaiting replies from Iraq's Oil Ministry to sign agreements covering at least two oil blocks. 'We have identified some concessions in the north and south for acquisition,' Kim says. KNOC plans to invest $1,000 million in rebuilding oil infrastructure and in exploration and production in Iraq. In the past 15 months it has signed two memorandums of understanding with the Oil Ministry and the UK's Amecto supply drilling technology and jointly develop local oil production capacity respectively.

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