SEOUL // The South Korean joint venture exploring for oil in Abu Dhabi aims to start drilling within months, the first stage of a US$500 million spending plan for the next five years.
Korea National Oil Corporation (Knoc) and GS Energy - companies that last year made South Korea the first new country to partner in an Abu Dhabi oil concession in four decades - are securing rigs for three appraisal wells planned at the Haliba field on the Omani border.
If the drilling is successful, the Korean partners and Abu Dhabi National Oil Company (Adnoc) hope to start producing a few thousand barrels of oil per day to start generating a modest income while they proceed with full-field development, a five-to-six-year process.
"We have high hopes that the organisation will be as successful as other Adnoc joint ventures such as Adco [Abu Dhabi Company for Onshore Oil Operations] and Adma-Opco," said Eugene Synn, Knoc's executive vice president of exploration, in an interview at the company's headquarters.
"Abu Dhabi is the most stable in politics and most developed in economics in the Middle East and has a very friendly environment for foreign investment," he added.
Knoc is among the companies vying for a slice of a far larger concession, a family of onshore fields responsible for 1.4 million barrels per day, or half the emirate's output. Bids for the Adco concession, as it is known, are due in October.
Haliba's oil is believed to be a close chemical match to Abu Dhabi's flagship Murban crude. Also called Area 1, Haliba is one of three exploration blocks in which the Korean partners hold a 40 per cent joint interest. Adnoc holds the remainder.
The partners completed seismic imaging of the field last year.
"Area 1 is the promising area," said JWEun, the leader of GS Energy's Middle East & Africa team. "This one is onshore and easier to access. We think inside it are big volumes."
Development of the other two blocks will proceed more slowly as the partners gather data and experience. Area 3, located offshore and believed to have oil and gas, will be the site of one exploration well to be drilled next year.
Area 2, although onshore, is currently not included in the five-year development plan since it is thought to contain shale.
Although the technique of fracturing underground shale rock formations has taken off in North America, serious shale development has not started in the Arabian Gulf because of the large quantities of conventional oil and gas that are simpler and cheaper to pump.
Given the relatively high cost of shale and risks including rapid reductions in flow rates, Knoc is not planning to jump head-first into shale acquisitions around the globe, said Mr Synn.
"It's strategically very important how we make a balance between conventional and unconventional," he added. "We should be careful how we increase our share of unconventional."
The company is slowly building up expertise, both at a technical institute in Calgary, Canada, and through a partnership with Anadarko at the Eagle Ford Shale formation in Texas.