S. Korea to import 7.5 mln tons of natural gas per year from Russia

SEOUL, Sept. 29 (Yonhap) -- South Korea plans to import 7.5 million tons of Russian natural gas per year beginning in 2015 via a pipeline running through North Korea to ensure a steady supply of fuel for the resource-strapped country, the government said Monday.

The preliminary deal reached in Moscow on the sidelines of the South
Korea-Russian summit meeting is expected to be the largest single bilateral
economic cooperation project between the two countries, valued at more than
US$100 billion, the Ministry of Knowledge Economy said.
"Under the deal signed by Korea Gas Corp. and Gazprom, 10 billion cubic meters of
natural gas will be imported every year for 30 years," said Vice Energy Minister
Lee Jae-hoon.
He said this translates into about $90 billion in gas imports during the cited
period, with about $9 billion being used to build and operate joint petrochemical
and liquefied natural gas (LNG) plants in Russia's Far East, the products of
which can be marketed abroad. The remainder will go into pipes built in North
Korea.
Korea Gas Corp. (KOGAS) is the largest importer of natural gas in the world,
while Gazprom is the biggest extractor of the resource.
Lee said the plan proposed by Russia in February calls for gas fields in Siberia
and the Far Eastern region to be linked by pipelines that will send fuel to
Vladivostok, just north of the North Korea-Russia border. The piped natural gas
(PNG) will then be sent through North Korea to South Korea.
The exact price of the gas to be imported will be decided in 2010 after
feasibility studies have been conducted, but PNG currently provided by Russia to
Europe costs an average $410 per ton, compared to the $499 paid by South Korea
for the same quantity of LNG imported from Qatar, Oman, Malaysia and Indonesia.
"Russia will be tasked with building the pipelines and negotiating with North
Korea," the policymaker said, adding that Pyongyang will likely agree to the
win-win proposal since it stands to earn $100 million per year from the project.
"If the final deal is signed, South Korea will be assured a safe and economical
energy source, with Russia winning a stable market for gas," Lee noted. He said
North Korea would also be paid a fixed sum for allowing the pipeline to run
through it territory.
He pointed out that KOGAS and its Russian partner are also considering ways to
convert PNG into LNG to send by ship to South Korea as a contingency plan against
complications arising in North Korea.
Besides this plan, the vice minister said that South Korea will start importing
1.5 million tons of LNG directly from the Sakhalin-2 well on the northern sector
of the island starting in 2009.
"The Sakhalin-2 well import arrangement is being pursued independent of this
proposed deal," he said.
The total amount of fuel that will be imported is roughly 20 percent of South
Korea's projected natural gas requirement in 2015. In 2007, the country bought
7.8 million tons of gas for home use alone, with more being spent on power
generation and various fuel needs.
Russia, which has an estimated 38 billion tons of natural gas, announced its
Eastern Gas Program last year, calling for $28 billion to be spent to link the
Krasnoyarsk, Irkutsk, Yakutsk and Sakhalin gas fields into a unified gas supply
system (UGSS).
The plan outlines the linking of Sakhalin and Yakutsk with the UGSS by 2015, with
pipelines connecting Krasnoyarsk and Irkutsk, located west of Lake Baikal, to be
completed by 2030.
The gas pipeline network could be used in concert with gas liquefaction
facilities to allow Russia to export LNG to Japan and the vast North American
market down the road.
yonngong@yna.co.kr
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