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. Last Updated: 07/27/2016

Gazprom Woos Seoul on Supply Deal


Itar-Tass

Gazprom CEO Alexei Miller

Gazprom and South Korea's state-owned gas company Kogas signed an agreement Monday that could result in direct natural gas supplies to South Korea and the joint development of a new pipeline network in eastern Siberia.

"A new chapter in cooperation between Gazprom and Kogas has opened," Gazprom CEO Alexei Miller told reporters after the signing ceremony Monday.

"In Korea we say: A good neighbor is like a relative," Kogas chairman Kim Myung-kyu said in praising the deal, adding that since both Gazprom and Kogas are state-owned, a profitable business relationship should be easy to forge.

South Korea last year consumed 22 billion cubic meters of gas and the country expects demand to double by 2020, according to Gazprom.

Under Monday's agreement, both companies are to work on feasibility studies and search for financing for future shipments of Russian gas to South Korea. Kogas is expected to finish a feasibility study for a pipeline from the giant eastern Siberian Kovykta field, which holds 1.9 billion cubic meters of gas. The license for the field is held by Rusia Petroleum, which is owned by BP, TNK, Interros and the Irkutsk regional administration.

Miller said the shareholders of Rusia Petroleum had invited Gazprom to acquire a stake in the company. Earlier this year, Gazprom said it was considering obtaining the regional administration's 11.6 percent stake.

Miller noted, however, that Gazprom will control all transportation of gas from Kovykta, regardless of whether Gazprom joins Rusia Petroleum or not.

He said that a number of routes for a new pipeline are being discussed, including via North Korea. Miller also said that in the future gas could be supplied to South Korea from another large untapped field, Chayadinskoye, although a tender for the license to develop the 1.2 trillion cubic meter field has yet to be announced.

Gazprom is also looking into an option of becoming a shareholder in Kogas itself, once the state-company is privatized, Miller said.

Kogas's Kim also said that his company is interested in joining Sakhalin II, a Royal Dutch/Shell-led consortium that signed its first liquefied natural gas supply deal with Tokyo Gas on Monday. Previously, Kogas was tapped as a potential buyer for Sakhalin II gas, but the deal did not work out.

Kim said Kogas wants to join the multibillion-dollar project as an operator together with Gazprom. Miller said Gazprom is considering its options. Gazprom received an offer to join Sakhalin II more than a year ago, but has yet to make a decision.