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The Korea Herald
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THE INVESTOR
July 16, 2024

Economy

Energy shares rally on potential East Sea jackpot

  • PUBLISHED :June 04, 2024 - 17:08
  • UPDATED :June 04, 2024 - 17:08
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President Yoon Suk Yeol speaks in a press briefing over the potential of vast oil and gas deposits in the East Sea at the presidential office in Seoul on Monday. (Yonhap)

Stock prices of oil- and gas-related companies extended their gaining streak Tuesday, backed by major oil and gas prospects off the East Coast following President Yoon Suk Yeol’s announcement from the previous day.

With the government approving exploratory drilling for a potential 14 billion barrels of crude oil and natural gas reserve at Yeongil Bay in Pohang, North Gyeongsang Province, energy-related shares listed on the Korean bourse continued the price gain from Monday.

Shares of the state-run Korea Gas Corp. stood at 43,050 won ($32) as of 2 p.m. Tuesday, marking a sharp gain of over 4,300 won or 10.98 percent from the closing price set at 38,700 won on the previous trading day. The public gas company is expected to manage the produced gas from the reserve. The Korea National Oil Corp. is not listed on the market.

Natural gas supplier Daesung Energy’s stock price reached 12,970 won, up 1,960 won or 18.11 percent, while shares of petroleum product manager Hung-gu Oil hit 20,050 won, up 3,900 won or 23.38 percent.

Stock prices of steel manufacturers Dongyang Steel Pipe and Daedong Steel had each gained over 20 percent from the previous trading session as of press time.

Even the shares of asphalt maker Korea Petroleum, unlikely to directly benefit from the project, reached 23,300 won, surging by 5,350 won or 29.81 percent, Tuesday.

But shares of KyungDong City Gas fell to 20,300 won, down 1,800 won or 7.92 percent, marking a contrast from a gain of 13.62 percent on the previous day.

Market analysts warned it is premature to determine the drilling project’s probability or profitability.

"It is still unsure about the project as it is in an early stage," Hana Securities analyst Yoo Jae-seon viewed. "The process has to be monitored for the time being, though anticipation may further grow.”

"The success rate of exploratory drilling is usually assessed to be at around 10 percent, but the government suggested 20 percent for the project, considering technological developments,” Yoo said. "As the project involves deep-sea drilling, the cost may be considerable.”

Other analysts questioned the lucrativeness of the project.

"The production volume should be differentiated from the size of the reserve," analyst Moon Kyeong-won from Meritz Securities viewed, referring to the figure of 14 billion barrels of crude oil and natural gas.

At Monday's briefing, the government explained the amount matches up to Korea's consumption of natural gas for up to 29 years as well as four years in terms of crude oil.

"Even if the project kicks off, it is uncertain whether the cost would be commercially feasible,” Moon said. “Private or foreign money could take part in the project as well.”

Despite the spike in energy-related shares, the benchmark Kospi remained flat at 2,669.93, down 12.59 points or 0.48 percent from the previous session, while the secondary bourse Kosdaq reached 850.14, up 5.36 points or 0.63 percent as of 2 p.m.

By Im Eun-byel (silverstar@heraldcorp.com)

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