Board of Audit and Inspection releases findings from public interest audit of Donghae deep-sea gas field project; Yoon rebuked minister over drilling timeline, prompting rushed schedule revision
Korea National Oil Corp. violated the State Contracts Act in pursuing the so-called Whale Shark Project — a deep-sea gas field development in the East Sea — by awarding improper contracts to specific firms and rushing ahead with drilling rig contracts and drilling itself without adequate technical verification or board approval, a government audit has found. The probe also confirmed that the drilling schedule was pushed forward at the behest of then-President Yoon Suk Yeol.
According to the results of a public interest audit on the Donghae deep-sea gas field project, released Wednesday by the Board of Audit and Inspection, KNOC violated the State Contracts Act when selecting a contractor for a prospectivity assessment. Although 17 firms were eligible to bid — exceeding the requirement of 10 or fewer — the company arbitrarily designated a small number of specific firms without conducting a market survey. In the technical evaluation for a second contract, KNOC improperly added a "performance capability" criterion not included in the original standards, disqualifying competitors and undermining the fairness of the process.
The audit also confirmed inadequate verification and rushed procedures. KNOC drew up a drilling plan for the Whale Shark site in October 2023, before the prospectivity assessment had even been completed. Despite a projected success probability of 19.1% — lower than that of previously failed exploration blocks — the company skipped thorough verification and issued a drilling rig contract without the required review and approval by its investment risk committee and board of directors. The failure to adjust the drilling schedule also cost the company a potential saving of 4.3 billion won ($3.18 million) in charter fees. When drilling was completed, gas saturation stood at just 6.3%, and the gas detected was confirmed to be biogenic gas with no commercial viability.
The audit also shed light on how the project was reported to the presidential office. In May 2024, the Ministry of Trade, Industry and Energy recommended against public promotion of the project, citing uncertainty over its prospects, but the presidential office decided to proceed with a government briefing. Then, in September, after the ministry reported that drilling would be completed in the first quarter of 2028, Yoon rebuked the minister, saying, "Political judgment is mine to make." The schedule was ultimately revised to an aggressive plan calling for four additional wells to be drilled by 2026.
The Board of Audit and Inspection called for disciplinary action against the staff member who led the improper bidding process, and referred a division head to the courts for violating the Conflict of Interest Prevention Act after the official awarded a perfect performance score to a former department to secure a bonus. The board also called for systemic reform requiring advance technical assessments by external expert institutions for future projects.
sunpine@heraldcorp.com
