South Korea’s largest energy company, SK Innovation Co., has begun oil production from an offshore field in the South China Sea, according to the Korea Economic Daily.
SK Innovation is working in the field through a former subsidiary, SK Earthon Co., and has teamed up with China’s CNOOC for the venture, with CNOOC holding a majority stake of 60.8%, while SK Earthon holds the remainder. The company separated from SK Innovation two years ago.
The site is expected to produce 29,500 barrels of oil every day at its highest production point. This amount is sufficient to meet over 1% of South Korea’s oil requirements. The media outlet reported that the peak production is anticipated in the following year.
The countries surrounding the South China Sea are concerned about China’s territorial claims to most of it. The dispute is fueled in part by the basin’s oil and gas resources.
In 2013, the EIA estimated that the South China Sea contains 11 billion barrels of crude oil and 190 trillion cubic feet of natural gas in both proved and probable reserves. Most of the oil and gas being extracted from the sea lies near the countries surrounding it in areas that China doesn’t 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 are in disputed areas. The EIA noted that these were not commercial reserves previously. However, technology has advanced quickly and they may be commercially viable now.
South Korea and China have disagreed on the South China Sea, but this has not stopped state-owned CNOOC from collaborating with private company SK Earthon. SK Earthon has ownership in ten oil fields that produce a total of 52,000 barrels per day.