Plans to Develop Siberian Gas Fields Backfire

Korea’s plans to partake in the development of Siberia’s gas fields are on the verge of vaporization.

The reason for this is because the Russian government recently started to limit and control its energy sectors from international access, which will make the incident a topic that will inevitably be discussed during President Roh Moo-hyun’s visit to Russia next week.

Yuri Trutnev, minister of the Russian Ministry of Natural Resources, announced on September 15, “The foreign company BP-TNK’s rights to develop the Kovytka gas fields near Irkutsk could be withdrawn.”

He also added, “This is because BP-TNK did not follow protocol established when they first acquired rights to develop the gas fields.”

BP-TNK is a conglomerate of both Great Britain’s British Petroleum and Russia’s fourth largest civilian oil corporation TNK and had plans to construct a 4,900-kilometer pipeline from Kovytka to China and then finally to the Yellow Sea. The projected completion date for the project is 2008, when the pipeline natural gas (PNG) will be supplied to China and Korea.

The adequacy of the project had already been evaluated, and even signatures from Russia, China, and Korea had been exchanged in Moscow last November.

If the project is completed, the gas field, which is estimated to contain some two trillion cubic meters of natural gas, will steadily supply Korea with 10 billion cubic meters of natural gas for the next 20 years.

Russia’s plans to suspend the project cost an estimated total of $15 billion, (approximately 17 trillion won), and relates to Russia’s move to nationalize the nation’s energy sector.

On September 14, the Russian government approved of the merger between the gas company Gazprom and the oil company Rosneft, which are both operated by the state. The public oil company Yukos, currently experiencing its worst financial setbacks after conflicts with the Kremlin, will most likely be nationalized.

Others predict that Russia will establish a corporate energy structure similar to Saudi Arabia’s, which directly controls the energy sector.

However Korea, China, and a number of other related nations have already invested capital into the Russian energy market and will resist by all means before this happens.

BP, currently leading the Kovytka project, has already invested $6.7 billion in Russia.

Ki-Hyun Kim kimkihy@donga.com