Seul asks Gazprom to build gas pipeline

Russia's Gazprom has resumed talks with the South Korean authorities on the construction of a gas pipeline through the territory of North Korea, Deputy CEO Vitaly Markelov said.

"To date, the political situation has been somewhat different, and the South Korean side has asked Gazprom to resume the project, and a series of talks has been held on this issue, and these talks are continuing," TASS cited Markelov as saying.

On March 30, speaking at the energy forum in Seoul, South Korean Foreign Minister Kang Kyung-hwa said that the improvement of the security situation on the Korean peninsula will make it possible to start the construction of a gas pipeline from Russia to South Korea via North Korea.

Deputy director of energy policy of the Institute of Energy and Finances, Alexey Belogoriev, speaking to Vestnik Kavkaza, noted that the construction of a gas pipeline to South Korea through the territory of North Korea is interesting to Russia primarily as a foreign policy project. "In general, the South Korean market is attractive for Russia, because it has high gas prices, high density of consumption with developed infrastructure and prospects for growing demand. Another thing is that there is absolutely no need to supply gas there via the gas pipeline. Russia's LNG deliveries are quite profitable, although, of course, currently Gazprom does not have its own LNG export capacities and will not have them in the next few years, which is why the company has to consider the pipeline option. In addition, there is a resource problem as well, because there is potential for production growth there, but it is constrained for some reason," he pointed out.

The main problem of laying the pipeline is the risk of escalation of the Korean conflict. "The current settlement is not much different from what we have seen in the previous 30 years, and there is no reason to expect that it will be long-term. In this sense we are talking about a  very risky project in political terms, since capacities can stand idle for many years. They should decide who invests in the capacities - if not Gazprom, then we will be happy to participate as suppliers, but if Seoul wants to lay the pipeline at Gazprom's expense, then it will be a project with a questionable pay-off period due to geopolitical problems," Alexei Belogoriev warned.

A leading analyst of the National Energy Security Fund, a lecturer at the Financial University under the Government of the Russian Federation, Igor Yushkov, suggested that Gazprom announced the preservation of this project, but not about its launch. "The meeting between Trump and Kim Jong-un and North Korea's certain denuclearization is just the first step. In order to build a gas pipeline, one must be sure that there will be no escalation of the conflict, but everyone understands that the Koreans will not close its nuclear program right away, the process of normalizing relations will be rather long. In addition, in terms of the gas industry, it is much more profitable for Gazprom to supply gas to South Korea in the form of LNG, because in this case the company may chose where to carry gas from the LNG plant - to South Korea, Japan or China," he said.

"In addition, we do not have an excess of gas in the Far East, on the contrary, there is a deficit, as there are no new deposits. The US imposed sanctions against the South Kirinsky offshore field, which significantly delayed its commissioning. That is, it's a big question where to get gas for Seoul. The only plus of this project is the already existing Sakhalin-Khabarovsk-Vladivostok gas pipeline. That is, the pipeline should be built only from Vladivostok to the border with North Korea. But much depends on the South Korea, especially if they are willing to buy gas at the border between Russia and North Korea. If they did not agree to do it, Gazprom will not take the risk of  gas transportation on the territory of North Korea," Igor Yushkov expects.