A Korea National Oil Corporation (KNOC)-led consortium has secured South Korea's first oil production assets in the United Arab Emirates (UAE), the Korean government said.
Korea has finalized a deal with Abu Dhabi National Oil Co. (ADNOC) to take a 40 percent stake in two onshore and one offshore oil drilling areas, as part of a wider push by oil import dependent Asian countries to secure upstream assets.
"We now have our own oil reserves in the Middle East," South Korean President Lee Myung-bak said in a statement.
"Through this, stable crude supply to us are more guaranteed, and our energy security taken a big step forward."
Under the deal, state-run Korea National Oil Corp (KNOC) will hold 34 percent and GS Energy will hold a 6 percent stake in the projects. ADNOC will own 60 percent.
The Korean consortium is expected to invest $2 billion of the estimated $5 billion total cost of developing the fields, the Korean government said in a statement.
The deal gives South Korea access to fields with combined reserves of at least 570 million barrels of oil, which Seoul has previously said it would have exclusive rights over if other oil supply sources were disrupted.
Oil production is expected to begin in 2014, if the development starts as planned later this month, and could rise to 43,000 barrels per day.
GS Energy, owned by GS Holdings Corp, has a 50 percent stake in South Korea's second-largest crude oil refiner GS Caltex Corp; with U.S. oil major Chevron holding the other half.
The UAE's concessions system for existing oil and gas fields allows producers to acquire their own equity hydrocarbons from the OPEC member but they have to provide much of the investment.
Western oil companies have held large stakes in the concessions for decades, but the upcoming expiry of existing concessions in 2014 offers rapidly growing Asian economies a chance to secure more supplies from one of the world's biggest crude exporters.
Rather than automatically renewing deals with western companies, the UAE plans to put its Abu Dhabi Company for Onshore Oil Operations (ADCO) oil concessions to tender when they come up for renewal.
"The big question is whether Asian companies will also be successful in entering the onshore ADCO concession when it expires in 2014," Robin Mills of Dubai-based Manaar Energy Consulting said.