Oil prices were climbing on…
Oil prices rose slightly on…
The chances of a gas pipeline from Russia to South Korea through the territory of North Korea—a decade-old idea that was on hold due to North Korea’s hostilities—have now risen with the recent rapprochement between the North and South, but political and economic hurdles to the project remain.
South Korea’s state-run Korea Gas Corp (KOGAS) and Russian gas giant Gazprom will carry out a joint pipeline study, Reuters reports, quoting South Korea’s energy ministry.
Resource-poor South Korea imports most of its energy, and until recently it was the world’s second-biggest liquefied natural gas (LNG) importer, before China surpassed it last year.
Gazprom has resumed talks with South Korea over the idea to build the gas pipeline from Russia’s Far East to South Korea through North Korea, Vitaly Markelov, Deputy Chairman of Gazprom’s Management Committee, said two weeks ago.
Gazprom had the idea to deliver 10 bcm of natural gas to the resource-poor and import-dependent South Korea by pipeline, but its route must pass through the territory of North Korea. Russia and South Korea signed a “road map” in 2011, but have not advanced beyond that, due to the tense regional situation.
At the end of March, South Korea’s Foreign Minister Kang Kyung-wha said that the idea of moving the gas through North Korea could be revived if the security situation on the Korean peninsula improved.
Despite the recent rapprochement, critics to a Trans-Korea pipeline point out several obstacles that the project faces. One is that Russia has often been seen as using gas supplies as a political tool. Another is that both North Korea and Russia are under U.S. sanctions, to various degrees, which makes looking for financing and partners somewhat difficult. A third point made by the project’s critics is that it would be safer for South Korea to continue importing LNG, and with rising U.S. LNG exports—more LNG from the United States.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.
While the Trans-Korea pipeline was a decade-old idea, it has been recently revived by both South Korea and Russia’s giant gas company, Gazprom, with the recent thawing of relations between South and North Koreas.
If built, the Trans-Korea pipeline will deliver 10 billion cubic metres a year (bcm/y) of Russian natural gas to South Korea through the territory of North Korea. However, all depends on a continued rapprochement between the two Koreas.
Critics of a Trans-Korea pipeline point out several obstacles that the project faces. One hurdle is that Russia has often been seen as using gas supplies as a political tool. Another hurdle is that both North Korea and Russia are under US sanctions, which makes looking for financing and partners somewhat difficult. A third hurdle is that it would be safer for South Korea to continue importing LNG, and with rising US LNG exports—more LNG from the United States.
On the other hand, proponents of the project provide the following rebuttals. They say that while it is true that Russia sometimes uses gas supplies as a political tool, this is no different from the United States using sanctions against countries with which it doesn’t see eye to eye to achieve some geopolitical aims. The second point is the fact that while Russia and North Korea are under US sanctions, the sanctions and the threats of sanctions against Russia and Germany respectively have not stopped them from going ahead with building the Nord Stream 2 pipeline bringing Russian gas under the Baltic Sea to Germany and the European Union (EU). The third point is that buying Russian piped gas is far cheaper than buying LNG particularly US LNG.
Russia has been building many pipelines to deliver its natural gas to every corner of Eurasia through the Turkstream and the Nord Stream 2 to the EU and through the power of Siberia to China and eventually to India. Moreover, Russia and Japan are actively discussing construction of a natural gas supply pipeline from Sakhalin (a Russian island in the Pacific Ocean) to Japan. So a Trans-Korea pipeline will not be out of place in Russia’s grand plan of supplying the world with its gas.
The reality of the 21st century—as Putin sees it—is that energy is a political instrument. Political alliances and the rise and fall of the international importance of particular countries will change in accordance with the energy supply routes.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London