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. Last Updated: 07/27/2016

Korea Ready To Develop Russian Oil, Gas Projects

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SEOUL, South Korea — South Korea and Russia on Tuesday agreed to boost cooperation on development of a major natural gas field in Siberia and other oil and gas projects, but no firm details were announced.

"The two parties agreed to closely cooperate on the gas development project in Irkutsk," the two countries said in a joint declaration after talks between President Vladimir Putin and South Korean President Kim Dae-jung.

They also pledged "to continue to discuss issues of mutual concern such as Korea's participation in oil and gas development projects in Sakhalin and other areas of Russia as well as mineral resources trade," the declaration said.

An official at South Korea's Commerce, Industry and Energy Ministry said Rusia Petroleum company chief executive Vladimir Kazakov and Sakhalin Governor Igor Farkhutdinov were among Russians who met South Korean officials on the sidelines of Putin's visit.

"Mr. Kazakov conveyed to our officials that President Putin would like very much for South Korea to participate in the Irkutsk project after the feasibility study is completed next year," said the ministry official who asked not to be named.

The Kovykta gas field near Irkutsk could yield an enormous 1.2 trillion cubic meters of natural gas, but would require some $11 billion in investment, including a 4,115 kilometer pipeline to South Korea via China and possibly North Korea.

Kazakov's firm, Rusia Petroleum, which owns the concession to exploit the gas field, is a consortium of Britain's BP Amoco and several Russian oil companies. South Korea's state-run Korea Gas Corp. last November agreed to participate in a joint feasibility study on developing the field with Rusia and China National Petroleum Corp.

Farkhutdinov asked South Korean officials to consider participating in oil and gas projects on Sakhalin, a Russian island north of Korea.

"Governor Farkutdinov urged South Korea to participate in Sakhalin's oil and gas projects. But no formal agreements or promises were made. We only said that our side would consider the proposal," said the South Korean ministry official. The official added that Farkutdinov's attention focused on possible South Korean investment in the Sakhalin-1 or 2 offshore projects.

Rosneft and its subsidiary Sakhalinmorneftegaz own a consolidated stake of 20 percent in Sakhalin-1 where oil production is expected to start in 2005.

Foreign participants in Sakhalin-1 include operator ExxonMobil, which owns a 30 percent stake, Japan's Sakhalin Oil and Gas Development Co. Ltd. also holding 30 percent, and India's ONGC Videsh Ltd., which holds 20 percent.

An official at KOGAS said the Sakhalin-2 project alone would require about $10 billion in investment, of which more than $1.3 billion has already been spent. Sakhalin-2, which produces 80,000 barrels per day of crude, began producing oil on a commercial basis in July 1999. Production of liquefied natural gas from the field is due to begin in 2006, with 9 million tons slated for export to Japan, South Korea, Taiwan, China and other markets.

Shareholders in Sakhalin-2 include Royal Dutch/Shell with 55 percent equity, Japan's Mitsubishi Corp with 20 percent and Japan's Mitsui & Co. Ltd. with 25 percent.