UPDATE 3-Russia, S.Korea agree $90 billion gas deal
(Releads with South Korean energy ministry statement)
By Dmitry Zhdannikov and Angela Moon
MOSCOW/SEOUL, Sept 29 (Reuters) - South Korea agreed on Monday a $90 billion deal to import Siberian gas that should allow Russia to diversify away from Europe while bringing North Korea closer to its neighbour via pipeline diplomacy.
South Korea's Energy Ministry said in a statement the country wanted to import up to 10 billion cubic metres of gas a year for 30 years after 2015 through a $3 billion pipeline that would run from Russia's Vladivistok across North Korea.
The statement came as South Korean President Lee Myung-bak met his Russian counterpart Dmitry Medvedev in the Kremlin.
A Kremlin official, who did not want to be identified, told Reuters earlier on Monday Russia's gas giant Gazprom (GAZP.MM) and Korean Kogas (036460.KS) would sign a deal on Monday in a fresh attempt to unlock a long-delayed pipeline project that Russia sees as a key alternative to markets in Europe.
Russia first pledged to supply gas to South Korea at the start of this decade but the project to build a pipeline to China and on to South Korea has been repeatedly delayed.
The delays were related to Gazprom's efforts to gain control over some of the biggest Siberian deposits, to ensure it has enough resources to fill the link.
The project was also complicated by the need to supply the gas either via the territory of North Korea or by a more expensive undersea route. A similar plan to build a rail link between Russia and South Korea through the territory of North Korea has also been stuck for years.
"In the long run, North Korea will probably consent to having the pipelines across their land, but it won't be easy to work out details with them considering the current status between the two Koreas," said Moon Hong-shik, an analyst at the South Korean Institute for National Security Strategy.
PIPELINE ROUTE CHANGES
Russian energy projects in Asia have started gaining momentum as the country warns the European Union, which has difficult political relations with Moscow, that it should be prepared to face tougher competition for energy resources.
The company, which already supplies a quarter of Europe's gas needs, says it hopes to reach a gas pricing deal with China next year to start gas deliveries in 2013-2014 [ID:nL8650762].
South Korea's statement on Monday that the pipeline would run from Vladivostok on the Pacific Ocean might mean Russia is no longer considering the Chinese and the South Korean pipelines as a unified project but would rather use resources of the Sakhalin island to fill the South Korean link.
South Korea consumes around 37 bcm of gas a year, mostly in the form of liquefied natural gas (LNG), a super-cooled gas shipped in tankers.
Gazprom will next year join the list of South Korean LNG suppliers, when together with its Japanese partners and Royal Dutch/Shell (RDSa.L) it launches its giant Sakhalin-2 project, which has pre-sold its production to Kogas along with customers in Japan and the United States.
Gazprom, which is also holding talks to buy all of gas production from ExxonMobil-led (XOM.N) Sakhalin-1 project, declined immediate comments.
Russia's main business lobby said on Monday it saw other opportunities for joint ventures between South Korean and Russian companies, including involvement of Korean companies in the giant East Siberian Kovykta gas field.
Gazprom hopes to buy control in Kovykta from BP's (BP.L) Russian venture TNK-BP but the deal has been delayed for over a year because of a shareholding dispute at TNK-BP itself.
"It is a huge, multi-billion project and there is space for many participants," Alexander Murychev, first vice-president of Russia's Union of Industrialists and Entrepreneurs, told Reuters on the sidelines of a Russia-Korea business forum which was timed to coincide with Lee Myung-bak's visit.
He said a decision on participation of a South Korean firm, such as state-run KNOC, could be taken before the year-end.
He also said South Korean Hyundai Steel (004020.KS) was in talks with Russian steel and coal miner Mechel (MTL.N) over becoming a partner in its Yakutugol coal deposits in the Far East but gave no details.
A Mechel spokesman ruled out an equity deal and said the two firms were only discussing a coal supply deal.
The South Korean energy ministry said that on top of the gas deal, Kogas suggested building a $9 billion petrochemical and LNG plant in Russia's Far East with a capacity to produce 1 million tonnes of polyethylene per year. (Reporting by Denis Dyomkin, writing by Dmitry Zhdannikov; editing by James Jukwey)
