Barossa gas field in Australia / Courtesy of SK E&S

By Park Jae-hyuk

The Korea Trade Insurance Corp. (K-Sure) decided recently to continue guaranteeing 400 billion won ($325 million) worth of financial support for a drilling project at Barossa offshore gas field in Australia, reducing uncertainties surrounding SK E&S that has participated in the project with Australia's Santos and Japan's JERA.

The state-run financial institution's latest decision indicates the Korean government's intention to prioritize energy security by standing with the energy firm against environmental activists who have pointed out that the drilling project could destroy the marine ecosystem and cultural heritage of indigenous Australians.

According to industry officials, K-Sure's decision was made a day before the expiration of the guarantee it had given for the project in December 2021.

This also came a couple of weeks after Australia's National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) ordered the project participants to halt their works on the pipeline until they submit a report on the construction's impact on indigenous cultural heritage.

In June last year, the aboriginal Australians filed a lawsuit against the project participants, citing insufficient talks with them. The Australian court ruled in favor of the plaintiffs, ordering the companies to stop drilling.

Amid the lingering dispute, concerns have grown that SK E&S may face setbacks in its plan to start producing blue hydrogen in Korea from 2025 with liquefied natural gas (LNG) imported from the Barossa gas field. The subsidiary of SK Group invested 350 billion won in 2012 to gain a 37.5 percent stake in the gas field. It made the final decision on its investment in March 2021 and started participating in the project to produce LNG at up to eight gas fields in the Timor Sea to the north of Australia.

Solutions for Our Climate criticized K-Sure, describing its decision as irresponsible.

The environmental group has urged K-Sure and the Export-Import Bank of Korea (Eximbank) to stop investing in the gas field project. Earlier this year, the activists also asked the Board of Audit and Inspection to audit the two state-run financial institutions regarding this issue.

However, calls have grown for the necessity of the government's financial support to exploit natural resources overseas.

"Although a small number of conglomerates have pushed ahead with exploiting natural resources overseas, it is difficult for most private enterprises to invest in resource development projects without government support," said Sung Dong-won, a researcher at the Eximbank's Overseas Economic Research Institute.

Energy industry officials also emphasized that Korea needs to develop gas fields overseas because the country relies heavily on imports of natural resources.

"The rising heating costs caused by the global LNG price hike proved the need to exploit gas fields overseas," an industry official said on condition of anonymity. "Once SK E&S begins to import LNG from the Barossa gas field, the company will be able to supply LNG in Korea at much lower prices."