Korea to Join Kazakhstan Oil Projects

South Korea will join in developing oil wells in Kazakhstan that could produce 650-850 million barrels of oil.

Yesterday, after the summit between President Roh Moon-hyun and Kazakhstan President Nursultan Nazarbayev adjourned, Korea National Oil Corp (KNOC) signed a protocol and a memorandum of understanding (MOU) with Kazakhstan’s state oil firm, KazmunaiGas (KMG), that set the terms for Korea to join oil well development projects in the Caspian Sea and the Tenge region.

This deal with Kazakhstan will secure the equivalent of Korea’s current annual oil imports (800 million barrels) and will exceed the size of foreign-based oil projects (660 million barrels) that Korea has joined in the past. This energy cooperation agreement with Kazakhstan is expected to increase Korea’s energy self-sufficiency rate. The agreement stipulates that the Korean consortium (about 450-650 million barrels of oil equity) will have exploration rights over oil wells in one of the oil fields in the Caspian Sea, and the MOU has specified that KNOC would have preferential rights to buy equity from KMG. KNOC will become the major shareholder by buying 69 percent of the equities (200 million equity barrels) of KMG in the Tenge oil well development project.

Kim Jin-seok, the foreign marketing director at KNOC said, “Oil production from the Tenge oil wells will begin in 2006, and production from the Caspian wells will begin in 2013. Oil production will continue for about 23 to 40 years,” adding, “Due to logistics, the oil will not enter Korea directly, but we plan on selling it to neighboring countries of Kazakhstan.” Seoul and Astana also signed an MOU on an uranium development project in Bogdanovski and an agreement on cooperation in the peaceful use of nuclear energy in which the South will provide nuclear-related technology to Kazakhstan for 10 years.

Wrapping up his two-day state visit to Kazakhstan, Roh flew to Russia. Roh will hold a summit meeting there on Tuesday with Russian President Vladimir Putin at the Kremlin.

Jung-Hun Kim jnghn@donga.com