BUSINESS

Russia to Talk to N. Korea About Pipeline to S. Korea

By Shinhye Kang

Bloomberg

SEOUL — South Korea plans to import $90 billion of natural gas from Russia via North Korea, with which it shares one of the world’s most heavily fortified borders, to reduce its reliance on more expensive cargoes arriving by sea.

State-run Korea Gas signed a preliminary agreement with Gazprom, Russia’s largest energy company, to import 10 billion cubic meters of natural gas over 30 years starting in 2015, the Ministry of Knowledge Economy said in a statement. The accord was signed in Moscow during President Lee Myung Bak’s three-day visit that began Sunday.

Gazprom Chief Executive Officer Alexei Miller said after talks Monday between Lee and Russian President Dmitry Medvedev that the exact delivery route hasn’t been determined and that shipments could begin as early as 2015.

The attempt to secure North Korea’s consent to build a pipeline on its territory comes as six-nation talks aimed at disarming the country’s nuclear capabilities have stalled. South Korea will seek guaranteed Russian gas supplies, whether the fuel is delivered via pipeline or otherwise, said Lee Jae Hoon, vice minister for trade and energy.

“Russia suggested a pipeline via North Korea, which is expected to be more economical than other possible routes,” the minister said in a news briefing. “Russia will contact the North to discuss this.”

Miller said the two sides agreed Monday “to start working on identifying the route for gas deliveries to South Korea,” and that “work will be focused on preparing the basic principles for long-term deliveries.”

The $90 billion estimate for the gas contract is based on current prices, which Russia and South Korea are likely to renegotiate every year, the Ministry of Knowledge Economy said.

“Transporting gas through North Korea could be risky for South Korea,” said Kim Jin Woo, a senior research analyst at Korea Energy Economics Institute. “But the project will ease tensions on the Korean peninsula if Russia successfully persuades North Korea” to accept the plan.

North Korea could earn $100 million a year from the gas-pipeline project, the Ministry of Knowledge Economy said.

In a statement following their talks, Medvedev and Lee said they support joint energy projects in Russia, South Korea and other countries. They agreed to cooperate on developing hydrocarbon deposits on Russia’s continental shelf, particularly the West Kamchatka shelf. Russia welcomes South Korea’s plans to participate in auctions for the right to develop energy reserves and to build petrochemical facilities in Russia’s Far East, the statement said.

The volume of trade between Russia and South Korea may reach $20 billion this year, up from $15 billion in 2007, and “this isn’t the limit,” Medvedev told reporters after the meeting.

Six-way nuclear talks involving the U.S., Russia, China and Japan stalled last month when Kim Jong Il’s regime said it stopped disabling the Yongbyon reactor, the source of its weapons-grade plutonium. North Korea complained about delays in being deleted from the U.S. terrorism blacklist.

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