North Korea’s political risk jeopardizes oil exploration, analyst says

SEOUL, Dec. 16 (UPI) --

North Korea has attempted oil exploration for decades, but its projects failed to find hidden reserves and attract foreign investment.

Joseph S. Bermudez, who previously worked as an analyst for the Defense Department, wrote on 38 North, a Johns Hopkins University website dedicated to North Korea issues, that North Korea's foreign relations problems and lack of equipment have hindered progress.

Three reasons have impeded North Korea: competing maritime claims with neighbors, especially China; lack of modern drilling equipment; and financial and political risks that are associated with oil and gas exploration and development with North Korea.

North Korea's heavy reliance on China for economic development could be its Achilles' heel in oil exploration. Bermudez wrote China has banned the sale of drilling equipment to North Korea as a means of keeping pressure on Pyongyang to resolve the existing maritime boundary dispute.

Beijing's response to international sanctions against Pyongyang may also be a factor in its decision to withhold technology, the analyst said in his statement.

China and North Korea did sign an agreement in 2005 on oil exploration, but little to no progress was made after relations deteriorated between the two countries.

In 2004, British oil and gas company Aminex signed a deal with North Korea to explore crude oil reserves for 20 years, but in 2012 Aminex backed out of the deal, concerned of the political risk involved with doing business in North Korea, CBS No Cut News reported Wednesday.

In 2008, Aminex and North Korean authorities were locked in a dispute after Pyongyang demanded the British firm refrain from sharing information on the exploration with its investors, Radio Free Asia reported.

Aminex had said a maritime area of 21,236 square miles in North Korea's East Sea, or Sea of Japan, showed high potential for oil reserves.