Singapore company seeks partners for land exploration in North Korea

Nov. 15, 2001
Sovereign Ventures Pte. Ltd., Singapore, said Thursday it is seeking experienced partners to explore and develop the first onshore oil and natural gas concession in North Korea to be granted to a foreign company.

By the OGJ Online Staff

HOUSTON, Nov. 15 -- Sovereign Ventures Pte. Ltd., Singapore, said Thursday it is seeking experienced partners to explore and develop the first onshore oil and natural gas concession in North Korea to be granted to a foreign company.

The concession, awarded by the Korean Oil Exploration Corp. in September, covers some 6,000 sq miles -- about 5% of North Korea's total landmass -- on the Chinese border across the Tumin River in the northeastern part of the Korean Peninsula. Sovereign Ventures officials said they expect to recover some 150 million bbl of oil or equivalent natural gas from the project.

The concession provides for an initial 3-year testing period for seismic and geophysical exploration, a 2-year exploration drilling stage, and, if successful, 20 years for development and production. Sovereign Ventures is to invest at least $10 million in the total project, including at least $2 million in the seismic testing and exploratory drilling stages, officials said.

Extensions of the concession agreement can be negotiated on mutually agreeable terms, said Ben Tan, executive vice-president of Sovereign, which was formed in 1993 as the upstream subsidiary of the Korasia group. Korasia is a consortium, majority-owned and managed by Singapore interests, that deals primarily in shipping and commodities trading.

Sovereign Ventures hopes to farm out much of the exploration and development to experienced oil and gas operators. "As this is such a large concession, we want to share the risk as well as the rewards," Tan said. "Based on the size of our concession agreement, recoverable reserves should be well in excess of 150 million bbl of oil or its equivalent in gas."

The company anticipates a 30% success rate in exploration drilling and up to 70% success with development drilling.

Using Russian technology, North Koreans drilled 14 shallow wells in the basin. "Hydrocarbon shows are said to have been found in some of the wells, a positive sign of potential discovery," said Sovereign Ventures officials.

Tan said, "Our concession agreement is very attractive," with tax breaks that "compare favorably" with those offered by members of the Association of South East Asian Nations, which includes Indonesia, Malaysia, Viet Nam, Brunei, the Philippines, Thailand, Singapore, Myanmar, Cambodia, and Laos.

"We expect to be able to recover five times our exploratory and three times our development drilling costs before the production-sharing clause applies," he said.

No corporate tax will be applicable during the first 5 years of operations, said Tan. During the following 2 years, he said, company profits are to be taxed at 5%, escalating to 10% after that.