A diplomacy coup for Korea

Korea, which produces not a single drop of oil, has secured the world’s sixth-largest oil field in the United Arab Emirates. Under a memorandum of understanding signed between the two countries in Abu Dhabi Sunday, Korea will invest in large commercial oil fields with an estimated 1 billion barrels of petroleum initially in place and retains the exclusive rights to develop three undeveloped oil fields having 570 million barrels of oil. Seoul is optimistic over an official deal as the agreement was signed between the presidents of the two countries, with Abu Dhabi’s crown prince observing the signing ceremony.

If the deal is signed, Korea will see its rate of independent oil and natural gas development, or total oil imports divided by the oil volume secured through the Korean government’s investment, rise to 15 percent, a huge leap from 4.2 percent in late 2007 and 10.8 percent at the end of last year.

While this is a coup in Seoul`s efforts to expand the base for energy independence, the country has a long way to go. The independent energy development ratio should exceed at least 20 percent to cushion shocks in the event of a global energy crisis. Japan’s energy independence ratio was 22.4 percent in late 2007, while that of China reached 27 percent in 2008. Considering that Korea’s energy efficiency is far lower than Japan’s, Seoul needs to further enhance its energy independence while striving to overhaul its economic structure for higher energy efficiency.

Oil fields in Abu Dhabi had been considered the territory of the elite, with energy developers from the U.S., Britain and France participating in the 1930s and 40s and Japanese companies in the 1970s. Korea’s planned participation is one of the greatest achievements in the nation’s energy diplomacy. Most Middle Eastern oil-producing countries develop crude oil independently, making it almost impossible for foreign developers to participate.

Since Korea won a contract in 2009 to build nuclear power plants in the UAE, the two countries are now seeking to form an economic partnership to last for the next 100 years. There should be no loopholes in bilateral strategic cooperation so that the agreement can result in oil production and provide a future growth engine for Korea. If Korea can secure a 100-percent stake in the three oil fields and directly operate oil development, the country can accumulate experience as a de facto oil-producing country.

The soured energy alliance between the U.S. and Saudi Arabia since the 2001 terrorist attacks in New York and Washington has brought changes to the international order. Political instability in the Middle East has increased Russia’s influence in oil supply, while China has been snapping up foreign oil fields to compete with the U.S. and Japan as energy powers. Energy is a key factor for national security as well as for economy. In addition to securing sufficient fossil fuel resources through stronger energy diplomacy, Korea should make strategic investment in developing cutting-edge renewable energies.