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Talks on gas pipeline project stalled

Korea, Russia far from rough draft, with possible N.K. shutdown of pipeline a thorny issue


Talks on pumping Siberian gas through North Korea to South Korea are unlikely to see any immediate breakthroughs, according to the Korean company that signed a preliminary deal in 2008.

Korea Gas Corp. and Russia’s Gazprom signed a memorandum of understanding in 2008 to pipe natural gas from Vladivostok to South Korea via the North from 2015. The KOGAS chief traveled to Moscow last month, shortly after Russia completed the construction of the Sakhalin-Vladivostok segment of the pipeline, but both sides are far from discussing any conditions, according to KOGAS.

“We have not even begun talking about a rough draft,” KOGAS spokesman Song Jae-ho said Tuesday.

“The project requires political decisions by the related governments. KOGAS is not in a position to speak on this.”

The thorniest issue is what happens if the North blocks the pipeline.

Korea Gas Corp. President Choo Kang-soo told the National Assembly last week that the plan was to import liquefied natural gas by sea at the price of pipeline natural gas, which costs only about a third of LNG shipments.

Choo also said his company plans to increase the annual gas imports by 1 million tons to 7.5 million tons and find ways to sell it to another country if it exceeds Korea’s natural gas demands. Both China and Japan have requested Korea supply gas, he said.

Installing and operating a pipeline underwater is considered infeasible due to corrosion.

President Lee said he believed the pipeline gas project could proceed “faster than expected” in a nationally televised talk show last month. He also said that he did not consider it as a “far-fetched dream” during his trip to New York two weeks later.

Having invited North Korean leader Kim Jong-il to the nuclear security summit in Seoul in March next year, Lee does not see Kim’s attendance as far-fetched, either.

Several local scholars have suggested that the pipeline should run along the eastern coast of North and South Korea, across to Seoul and north to Pyongyang to keep the North from shutting down the pipeline.

Kwon Won-soon, economics professor at Hankuk University of Foreign Studies, estimated the pipeline construction to cost about $2.24 billion and the annual commission for passage through North Korea at about $118 million in a forum on inter-Korean cooperation for energy and transportation infrastructure last week.

“The costs for the PNG will be the major factor,” Kwon said.

“And we don’t know what will happen if Russian Prime Minister Vladimir Putin, who has favored liquefied natural gas, becomes the president next year,” Kwon said.

Russian newspaper Moskovskie Novosti reported last week that Gazprom was hoping to deviate from its policy of taking responsibility for gas transport to the importing country in its gas supply contract.

Concerns are high here that North Korea could try to use the PNG project to leverage its political and economic interests.

Kim Jong-il has repeatedly said that his country is open to resumption of the six-nation denuclearization talks, but his nuclear envoys are yet to agree on the terms with their counterparts in Seoul and Washington.

By Kim So-hyun (sophie@heraldcorp.com)
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