SK’s oil development project, which has been aiming to become a “resourceless oil-producing country” for 40 years, is expected to record its highest performance ever this year. The plan is to maximize profitability through full-scale production in the Chinese block, for which it has secured independent operating rights for the first time, and additional investment in the Vietnamese block, which has been a reliable source of revenue for 20 years.
According to the industry on March 24, SK innovation’s resource development subsidiary, SK earthon, will extract 10 million barrels of crude oil annually from the 17/03 block in China this year. This block, which started its first commercial production last September, is currently planning to increase its production wells from 8 to 13 and produce 30,000 barrels of crude oil per day.
The annual production of 10 million barrels is equivalent to 350% of the daily domestic oil consumption. Notably, the 17/03 block, where SK earthon has secured its own operating rights (with a 40% stake), is the first block where it can expect higher profits compared to others. The expected revenue from the 17/03 block in China this year is 250 billion won, significantly surpassing SK earthon’s 2022 operating income of 100.4 billion won (US$74.85 million).
An industry insider stated, “Until now, we had to participate in development with several companies, which limited our profits due to owning around 10% of the shares. Starting with the 17/03 block in China, we are increasing our holdings in blocks where we have secured operating rights, and we expect steady improvement in profitability.”
Before China, the 15-1 block in Vietnam, which has driven SK earthon’s performance, maximizes profitability through additional investment. The 15-1 block, which produced its first crude oil in 2003, has been a profitable block, producing a cumulative 400 million barrels of crude oil until last year. It is currently producing 13 million barrels of crude oil annually from 4 production wells.
With the mining rights contract expiring in September next year, SK earthon is planning new mining rights contracts and additional investments. This decision is based on the block’s continued profitability, contrary to initial life expectancy estimates. From 2026, crude oil production is also planned in the 15-1/05 block in Vietnam, which is estimated to extract up to 100 million barrels, garnering market expectations. Exploration work in the 16-2 block in Vietnam (with a 70% stake), where SK earthon has obtained operator status for the first time, is also accelerating. Additional exploration and appraisal drilling are planned for the first half of next year.
SK earthon is also exploring new regions beyond Vietnam. In 2022, it successfully bid for a block in Malaysia for the first time, embarking on resource exploration. As the main operator with an 85% stake, it is leading the exploration of the SK427 block located offshore in the Sarawak region of Malaysia. Currently, SK earthon is identifying the optimal drilling structure within the SK427 block and plans to expand its portfolio by securing nearby basins to establish a foundation for mid-to-long-term growth.
Since starting its participation in the Karimun block in Indonesia in 1983, SK earthon has continued its overseas resource development business for 40 years. Currently, it is working on 10 blocks in 8 countries and 4 liquefied natural gas (LNG) projects. The crude oil and natural gas produced through these projects amount to an average of 57,700 barrels per day (on an oil equivalent basis).