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. Last Updated: 07/27/2016

South Korea Mulls Russian Proposal On Sakhalin Oil and Gas

SEOUL, South Korea - South Korea is considering a Russian proposal to invest in oil and gas projects in Sakhalin, an official at the Ministry of Commerce, Industry and Energy said Tuesday.

The proposal emerged at a meeting between South Korean officials headed by Deputy Prime Minister Jin Nyum and their Russian counterparts in Seoul Monday.

The two sides met ahead of President Vladimir Putin's three-day state visit to South Korea which began Monday evening.

The ministry official said the Russian delegation included Sakhalin governor Igor Farkutdinov and Rusia Petroleum chief executive Vladimir Kazakov.

South Korea currently has no exploration and production investments in Russia.

"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 official who asked not to be identified.

FOCUS ON SAKHALIN 1,2

The official added that Farkutdinov's attention focused on possible South Korean investment in the Sakhalin 1 or 2 projects, located offshore.

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

ExxonMobil Corp is the project operator with a 30 percent stake. Japan's Sakhalin Oil and Gas Development Company Limited (SODECO) holds a 30 percent stake, and India's ONGC Videsh Ltd owns 20 percent.

SAKHALIN 2 REQUIRES $10 BLN IN INVESTMENT

The Sakhalin 2 project alone would require about $10 billion in investment, of which more than $1.3 billion has already been spent, an official at state-run Korea Gas Corporation (KOGAS) said.

Sakhalin 2 began producing oil on a commercial basis in July 1999.

The field currently produces 80,000 barrels per day of oil and liquefied natural gas (LNG) production is due to begin in 2006, with about nine million tonnes 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 Corporation with 20 percent and Japan's Mitsui & Company Limited with 25 percent.

IRKUTSK ON AGENDA

Rusia Petroleum's Kazakov discussed at Monday's meeting the joint feasibility study of developing the Kovyktinskoye gas field in Irkutsk, the ministry official said.

China National Petroleum Corp (CNPC) is also participating in the feasibility study.

The study would also lay the groundwork for construction of the 4,115 km pipeline.

The Kovyktinskoye gas field project, which would require about $11 billion in investment, is estimated to have gas reserves of 1.2 trillion cubic metres.

"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.