▲ Myeong Seong, CEO of SK Earthon

Q1. 2022 is the first year that SK Earthon operates as an independent corporation after the spin-off from SK Innovation in last October. So first of all, we’d like to know your determination for this year.

SK Earthon is currently at the turning point of innovation and a huge change called the “Carbon to Green.” Last year, we had countless things to ponder about and held passionate debates, completing the Financial Story centered on the mid- and long-term goal towards the “Carbon Neutral Company.” As part of its efforts, we became an independent company last October 1st and thus began the long journey that creates the future as the company specializing in E&P and Carbon Capture & Storage (CCS) based on core technologies.

I know it will be filled with challenges and fears because this is a path nobody has taken. And trials and errors may be inevitable. So be it may, we still hold the bounty, 40-year experience and competency of being the company specializing in E&P, and our members are experts with unrivaled skill sets. Along with them are the spirit very distinctive to SK Earthon, the spirit shaped by the “Exploration DNA” that does not break in the face of any challenges.

Given that this juncture calls for our most meticulous and action-charged movements to enable the Financial Story of SK Earthon, I will move forward with grave responsibility and conviction as its CEO. It is my hope that the members will become happier, and the company value will be maximized in the process of working towards this goal and earning its fruits. I will do my best to make it happen.

▲ CEO of SK Earthon Myeong Seong presents the company’s “Green Transformation” strategy to actualize carbon neutrality during his keynote speech at the Overseas Resources Development Symposium held in Seoul on December 19, 2021.

Q2. I deem the E&P business of SK first began by walking on the “untrodden path” as well, whose first step was taken a long time ago. Please run us through the history of challenges leading to the point of SK Earthon becoming an independent corporation.

In 1980, around the time SK (formerly Sunkyong) bought the Korea National Oil, the country was facing a severe crisis with serious problems with the supply of crude oil following the Second Oil Crisis. Around this time, former president Chey, Jong-hyon created the Resource Planning Office in 1982, under his strong conviction that any country should have the ability to independently produce and reserve crude oil to ensure energy security. That was the actual beginning of the E&P business. The project was about turning the country without any oil into an oil-producing country. Thus, I believe it could be said that the history of SK’s oil production project is the same as the history of South Korea’s oil production.

The first-ever drilling exploration of SK took place in 1983 in Karimun Block in Indonesia, but unfortunately, it was not able to end in success. But the following year, SK succeeded in discovering crude oil for the first time in Marib Block in northern Yemen, allowing the oil to be brought in, starting from 1988. It was the point when the project, turning the country without any resources to become an oil-producing country, bore its fruits. For the first time ever in Korean history, the crude oil produced by South Korea was brought into the country.

▲ Y Winner oil tanker sails into the port with crude oil produced in Marib, North Yemen, in January 1988.

Since then, SK has participated in more than 100 projects in 34 countries all around the world, and stellar achievements were specially made in Yemen, Peru, Brazil, and Vietnam. At the present moment, the growth strategy is centered around exploration projects in Southeast Asian countries such as Vietnam where SK is the operator. In particular, in 2015, we were able to participate in the marine oil block located in the South China Sea, the first-ever in the country, and three years later, in 2018, it successfully discovered the PRMB (Pearl River Mouth Basin) block 17/03. It was the moment SK bore the great achievement of discovering the crude oil for the first time as an operator.

Along with our existing “Upstream Area,” which is the E&P, this year, we selected “CCS-based Green Area” as our new axis of growth. Therefore, 2021 was meaningful that we started taking serious and active steps to become the Carbon Neutral Company. Therefore, I would like to take this opportunity to express my gratitude to the members who have joined me under the spirit of SUPEX and to the stakeholders for their support and trust towards us, SK Earthon.

Q3. 2022 marks the 60th year anniversary of SK Earthon’s mother company – SK Innovation, and the 40th year of the SK’s resource development project that first began in 1982. So what are the key strategies of SK Earthon this year?

As I mentioned earlier, SK Group’s E&P business tells a long history of relentless challenge and determination. It was the path no one had ever taken in the country, and the success rate was low given the nature of the business. And it required professional skill sets and massive investments, which we lacked at that time. But the indomitable entrepreneurship and leadership, as well as the spirit of resilience against failure, finally brought what is now SK’s E&P business.

So the 40 years of history is the history of challenge and determination, and this year 2022, marks the first year of SK Earthon operating under its name. It is also important as we have to acquire the “foundation to achieve sustainability.” SK Earthon has the duty to complete the calling of this age, which is “reducing carbon and achieving net-zero,” based on the best oil development technology, all the while creating the happiness of the stakeholders. Now, all the members of SK Earthon and I will strive hard to achieve the Financial Story and the goal.

▲ CEO of SK Earthon Myeong Seong explains the company’s Green Transformation strategy to staff members in a internal meeting

Q4. We could definitely see that strong determination from the beginning years of E&P business to the establishment of SK Earthon. Could you share with us latest updates of E&P business?

The crux of E&P business of SK Earthon is centered on acting as the operator in the exploration projects in the Southeast Asian regions, and in particular, we aim to become the “CO2 Minimizing Operator” that operates the entire processes (exploration, development, and production) in an eco-friendly way.

First off, the PRMB block 17/03 in China we discovered last 2018 is currently in the process of EPC (Engineering, Procurement, Construction) development stage after we declared the final investment decision (FID) with our partner, CNOOC. The processes relevant to the production of the first batches of oil are underway to ensure that it can take place in the latter half of 2023. And as for the block 15-1/05 in Vietnam that was discovered earlier than the one above is currently going through the approval process from the Vietnamese government regarding the FID so that the production takes place by the latter half of 2024. The PRMB block 17/03 in China is especially meaningful to SK because it would be the first one ever that makes the SK the “Full-Cycle Operator,” which led the whole process, including the exploration, development, and production, successfully.

The exploring blocks in China and Vietnam also had accomplishments worth taking notice of. Among them, SK was able to identify the considerable amount of underground rock structures that have a high possibility of containing oil and gas in the blocks 26/26 in China and 16-2 in Vietnam, thanks to our expertise. The drilling of an exploration well is slated to take place in the third quarter of this year in block 26/26, raising hopes that we will receive good news from the one in China.

SK Earthon places great focus on the E&P business strategy where we are the operators, and especially, we put heavy importance on attaining professional technology in the field of exploration. In fact, we have made great strides in the past few years, following the acquirement and advancement in the core exploration technology. Particularly speaking, we have been focusing our efforts on discovering and internalizing the core technology that fuses with DT.

Meanwhile, the increase of LNG profitability, which is the result of recent geopolitical issues and increased demands, led to high business performances in three LNG projects SK is currently taking part in, and such a trend is expected to continue down the road.

And continuing this trend in a steady manner and ensuring balanced growth in the portfolio of the E&P business cannot be done without the acquirement of new oil blocks to explore, which should be done at an appropriate level. From this perspective, SK has been actively pushing forward with the participation in the marine blocks near Southeast Asian regions, which has a high potential for success. We expect that we can bring good news to the stakeholders and members before the first half of this year.

Q5. Given that SK Earthon is a company that develops oil, it would be quite challenging to achieve “Carbon to Green” and execute the Financial Story. What strategies do you have to resolve it?

Yes, it is true that the E&P business comes with a risk that can never remove itself from the CO2 issue. However, the entire point in our Financial Story towards the goal of Carbon to Green lies in transforming risks into opportunities. That is, it is growing to become the “CO2 Minimizing Operator” that minimizes the emission of CO2 in the process of producing oil and gas and the “CCS business operator” that innovates the business model by permanently saving/isolating the CO2 when the oil and gas are being used.

To this end, various business activities in and outside the country are taking place at the moment.

First, in the entire process of EPC of block 17/03 in China, where the first-ever development project is happening as the operator, we have designed and constructed various facilities that applied the technology that lowers the emission of CO2 to a minimum, and we plan in the future to automate the production fields and actively review the usage of renewable energy to become the successful CO2 Minimizing Operator.

▲ Korea National Oil Corporation’s gas field in the East Sea that SK Earthon has been participating as a CCS business project.

In the field of CCS, we have been participating in the national project and holding joint projects to discover and acquire CO2 storage in the Yellow Sea and the East Sea. Aside from this, we are working with major and national petroleum companies in Australia and Southeast Asian countries to participate in the CCS project and start the joint research of discovering the said storage.

The most important point is that the core technology of E&P business is almost the same as the one used in CCS business. That is, the SK’s accumulated competence and technology in oil exploration, development, and production are indispensable to the CCS project that stores CO2. Moreover, SK Earthon was the first private E&P company to participate in the national project to discover CO2 storages in the West Coast, which shows how solid its footing is in the country as the “First mover.”

Q6. You just picked the CSS as one aspect of the completion of the Financial Story and the crux of the business transformation of SK Earthon. Could you elaborate some more.

The Carbon Neutral Company that we strive to achieve could be simply summarized as “Carbon Solution Provider.”

And the CCS, which is the project to actualize carbon neutrality, is the leading “Carbon to Green” business of SK Earthon. The long history of being in the E&P business equipped us with competent geographical evaluation tools and the capability to operate such facilities. By taking advantage of these strengths of ours, we can select the designations that are appropriate to be used as the CO2 storage, and the underground structure simulation of ours is so excellent that we are unrivaled when it comes to evaluating the storage amount of CO2 and actually inserting it and operating the storage Not only that, our monitoring skills to prevent leakage are the best in the country. The whole process is about reversing what we have been doing – digging out the oil from the ground – and sending back the major cause of greenhouse gas, CO2, into the ground. This task is the one SK Earthon aspires to achieve as the “Carbon Solution Provider” as we have superior knowledge regarding underground structures and carbon.

This will especially will become the year of an important achievement in the field of CCS. As I mentioned to you a while ago, we plan to nominate and acquire storages in the Yellow Sea and the East sea of our country and actively seek opportunities to participate in foreign projects. The priority would be in the areas where the CCS projects are actively underway, such as Australia and Malaysia. The mid-and long-term goal is to expand to the countries where our E&P business is taking place, China, Vietnam, etc.

Our goal to become the “Carbon Solution Provider” is a challenge itself and would demand from us various changes and innovation, but to us, we have the specialized skills and experiences we have accumulated so far. This will become the impetus to bring us forward to a new, bright future, and I am very confident about this. As the best CCS company in the country, we, SK Earthon, will achieve the success of innovating the new business model along with our members.

Q7. Are there any other words you wish to tell your company members and the stakeholders before we close the interview?

The members of SK Earthon have been writing the story of growth for 40 years in the field of E&P business against the world, facing various challenges. Now, they are the very heroes who are about to write a new history towards the goal of becoming the “Carbon Neutral Company.” I am sure that the journey will not be entirely a smooth sail because we would be walking on an untrodden path, with assignments and goals of our Financial Story, unlike anything we have experienced. But when our expertise and passion combine with the organization culture that values cooperation, I have no doubt that we can achieve it.

In particular, actualizing the Financial Story and CSS, the core of the business model innovation, requires cooperation with various stakeholders. SK Earthon will stay at the center of the cooperation and play the role of a trigger, elevating all of us to become the Carbon Solution Provider and succeeding in our vision of carbon neutrality.

At the moment, the market is expected to have many lows because of the COVID-19 and various geopolitical issues. But I see this as the perfect time to remember that we are all together in this journey, and I, as the CEO of SK Earthon, will take the front, and sometimes the back, to raise the company value and lead all of us toward the goal.