The first drilling operation, undertaken despite opposition from the main opposition Democratic Party, cost approximately 1 trillion won ($750 million), with the government and KNOC each covering 50% of the expense. (Yonhap)
SEOUL, Feb. 9 (Korea Bizwire) — South Korea’s ambitious deep-sea gas exploration project, codenamed “Daewang Whale,” faces an uncertain future after the first drilling attempt failed to yield economically viable hydrocarbon reserves.
With the government unwilling to fund a second drilling phase and the Korea National Oil Corporation (KNOC) grappling with financial instability, the project’s continuation is in doubt.
A senior official from the Ministry of Trade, Industry, and Energy disclosed in a briefing on February 6 that while the initial drilling confirmed the presence of a high-quality reservoir, thick cap rock, and shale formations, it did not reveal commercially viable hydrocarbons. “The economic feasibility remains unproven,” the official stated.
Financial Roadblocks and Political Opposition
Budgetary constraints pose the most significant challenge to further exploration. The government has completely cut funding for Daewang Whale in its 2025 budget, and prospects for securing additional funding through a supplementary budget appear slim.
Given the financial burden, the administration has decided not to pursue further drilling at the site, instead shifting focus to exploring six other promising offshore structures.
The first drilling operation, undertaken despite opposition from the main opposition Democratic Party, cost approximately 1 trillion won ($750 million), with the government and KNOC each covering 50% of the expense.
With no significant discoveries, political pushback is intensifying. The opposition has called for a reassessment of the project, arguing that further investment without clear prospects would be irresponsible.
A drilling ship, West Capella, has docked at Busan Namoe Port to determine whether oil and gas deposits exist in the promising deep-sea gas field structures of the East Sea. (Yonhap)
Uncertain Prospects for Private Investment
In an attempt to salvage the initiative, the government is exploring foreign investment opportunities, hoping to attract major international energy firms to participate in a joint venture with KNOC. However, given the disappointing results of the first phase, experts warn that securing foreign partners may prove difficult.
KNOC’s financial woes further complicate matters. The state-run company has been undercapitalized since 2020 and has absorbed an estimated 500 billion won ($375 million) in losses from the failed drilling attempt. Industry insiders believe KNOC lacks the financial capacity to proceed alone.
A previously announced plan to raise $2.5 billion through bond issuance and long-term borrowing is now in jeopardy, as the project’s uncertain future has diminished its attractiveness to investors.
Delays and Political Fallout
Even if a second drilling attempt were approved, experts predict significant delays. Unlike the first phase, which bypassed a preliminary feasibility study, any future government funding would require a full assessment process.
Additionally, political negotiations would be necessary to justify further investment in the face of growing skepticism about the viability of deep-sea gas exploration.
KNOC’s broader track record in resource development is also under scrutiny. According to the opposition party, KNOC has recorded a loss rate of 65% on past overseas resource projects, with 3.1 trillion won ($2.3 billion) in losses out of 4.8 trillion won ($3.6 billion) in total investments. This raises concerns that another costly offshore endeavor may face similar risks.
The drilling ship West Capella anchored at the Daewang Whale drilling site, approximately 40 km off the coast of Pohang, in the early hours of December 20 last year, adjusting its position for precise drilling. (Image courtesy of Korea National Oil Corporation)
Escalating Political Tensions
The Democratic Party and other opposition groups have seized on the failed drilling as political ammunition against the government. At a party leadership meeting on February 7, senior opposition lawmaker Kim Min-seok condemned the project as a “grand deception,” blaming President Yoon Suk Yeol and the ruling People Power Party for reckless spending.
Other opposition figures have called for a full parliamentary investigation, including a potential audit by the Board of Audit and Inspection. Lawmaker Seo Wang-jin criticized the project’s economic and environmental feasibility, branding it “a wasteful endeavor that must be halted before more taxpayer money is lost.”
Despite the mounting controversy, the National Assembly’s Trade, Industry, and Energy Committee is set to hold a full hearing on February 19 to scrutinize the project further.
As South Korea reevaluates its deep-sea resource strategy, the fate of Daewang Whale remains uncertain, with financial, political, and geological factors all casting doubt on the viability of further exploration.
Ashley Song (ashley@koreabizwire.com)
