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South Korea’s biggest energy major, SK Innovation Co. has started oil production from an offshore field in the South China Sea, the Korea Economic Daily reports.
SK Innovation, which is operating in the field via a former subsidiary, SK Earthon Co., has partnered with China’s CNOOC on the project. CNOOC is the majority partner, with a 60.8% interest, and SK Earthon holds the rest. The company was spun off from SK Innovation two years ago.
The field is seen producing 29,500 barrels daily at peak production, which would be enough to cover more than 1% of South Korea’s consumption, the news outlet said, noting that peak production rate is expected next year.
The South China Sea is a hot issue for the countries surrounding it because of China’s claims for territorial rights to most of it. Oil and gas resources in the basin are one of the reasons the issue is so hot.
Back in 2013, the EIA estimated oil and gas reserves in the South China Sea at 11 billion barrels of crude and 190 trillion cubic feet of gas in both proved and probable reserves. Most of the oil and gas that is being extracted from the sea lies close to the countries that surround it in areas that China does not dispute.
However, there may be another 12 billion barrels of oil and 160 trillion cubic feet of natural gas in untapped deposits—about a fifth of them in disputed areas. The EIA notes that these were not commercial reserves at the time, but technology has moved on quickly and they may well be commercially viable now.
South Korea and China have been at odds over the South China Sea but it appears this has not prevented the state-owned CNOOC from working with private SK Earthon. The latter has stakes in ten oil fields whose combined output is 52,000 barrels daily.
By Charles Kennedy for Oilprice.com
Charles is a writer for Oilprice.com