PRICE OF GAS SUPPLY FROM RUSSIA TO CHINA, S. KOREA STICKING POINT
SEOUL, June 8 Asia Pulse - A gas field development project in Russia designed to supply natural gas to South Korea
and China has hit another snag, crippling the initial plan to settle the price for gas by the end of the month, South
Korea's state-run energy company said today.
China has postponed the trilateral talks, scheduled for this month, on the price of gas to be pumped from the Kovykta
gas field in Russia's Irkutsk region to next month, citing domestic affairs, the Korea Gas Corp. (KOGAS) said.
The delay is expected to further hamper the US$17.6 billion project, which is already stalled due to the Russian
government's sudden proposal to change the gas pipe route from across the Yellow Sea to the Far East.
Under the initial plan, a pipeline would run from the Russian gas field through Shenyang in China and across the
Yellow Sea to Pyeongtaek in South Korea to transport 20 billion and 10 billion cubic meters of gas to China and South
Korea, respectively, per year.
However, Russia has recently suggested redirecting the pipeline through Khabarovsk to Nakhodka.
"Russia's unexpected proposal just doesn't make any sense," a KOGAS official said, requesting
anonymity. "It's just a strategic move aimed at getting the upper hand in price negotiations."
China, which KOGAS said holds the key to the success of the talks, is demanding the gas be priced at a level similar
to that of coal, while Russia is adamant about keeping the price higher.
KOGAS President Oh Kang-hyun said earlier that the project can be profitable only if the price is more than 30 per
cent lower than the level suggested by Russia, and that KOGAS may consider changing its source to the Sakhalin area if
Russia maintains the high prices.
"The price negotiations are in a virtual deadlock, with each involved party determined not to back down from its
initial position," the official said. "However, the development of the Nakhodka line is much more costly and
since there is no alternative we will be able to strike a deal eventually."
China and South Korea have already completed a three-year joint feasibility study on the initial Yellow Sea route,
development of which was supposed to start in 2008.
The Kovykta gas field, 450 kilometers north of Irkutsk in eastern Russia, has an estimated reserve of some 1 billion
tons of natural gas, enough to extract 21 million tons of gas every year for the next 30 years.
(Yonhap)
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