SEOUL, Sept. 17 (UPI) -- South Korean President Roh Moo-hyun embarks on a high-profile trip to Russia and Kazakhstan on Sunday to hunt for oil and gas assets in the energy-rich countries.
Officials say the presidential tour is part of government-led efforts to diversify the country's crude oil and gas import sources heavily depend on the volatile Middle East.
South Korea, which has the world's 12th largest economy, is vulnerable to rises in oil prices because it imports all of its crude oil requirements, nearly 80 percent of which comes from the Middle East. It ranks as the world's fourth-biggest oil importer and the second-largest buyer of liquefied natural gas (LNG).
Commerce, Industry and Energy Minister Lee Hee-beom said President Roh would focus his diplomatic efforts during the visits on seeking stable oil and gas supplies from the two countries.
"The energy sector has the highest potential for South Korea's relations with Russia and Kazakhstan," he told journalists. "Energy cooperation will be one of the top agendas President Roh's tours," he said, adding the visit would be a "turning point" in energy cooperation with the countries.
Roh is scheduled to leave for Kazakhstan on Sept. 19 on a two-day visit, which would be followed by a four-day trip to Russia. He would be accompanied by a high-powered delegation of 50 business leaders, including Yi Ok-su, president of state-run Korea National Oil Corp.(KNOC), Oh Kang-hyun, head of state-run Korea Gas Corp.(KOGAS), and Shin Heon-chol, president of SK Corp., the country's top refiner, among others.
In a summit with Russian President Vladimir Putin on Sept. 21, Roh would ask for Moscow's cooperation in Seoul's bid for participation in the gas and oil development in East Siberia, a presidential official said.
Roh and Putin will also discuss the proposed LNG delivery from the Sakhalin region to South Korea to meet the long-term demand for natural gas demand, he said. Russia boasts the world's largest natural gas reserves and the world's seventh largest oil reserves.
KOGAS, the world's single biggest LNG buyer, is seeking a long-term gas deal with Russia to replace a 20-year Indonesian contract that expires in 2007. The country's gas monopoly has recently issued a tender to buy 5.3 million tons per year of long-term LNG from Russia, Indonesia, Malaysia, Australia, Oman, Brunei and Qatar. KOGAS, the country's sole LNG importer and wholesaler, imports 19.4 million tons of LNG annually under long- and medium-term supply contracts.
"We have sent invitation letters to our existing suppliers and new suppliers, including those in Sakhalin, Russia," said Song Jae-ho, a senior KOGAS spokesman. "We will choose potential suppliers by the end of September for serious talks," he said. LNG is a major fuel in South Korea for heating during winter and power generation.
South Korea has also been exploring the possibility of a natural gas pipeline from the Kovykta natural gas deposit in the Irkutsk region of Eastern Siberia. It is designed to ship 20 billion cubic meters of gas annually to China and 10 billion cubic meters to South Korea starting 2008.
The three nations have finished their feasibility study for the construction of a gas pipeline from Kovykta condensate field in Russia's Irkutsk to China and South Korea.
"The goal is to secure a supply of economical natural gas through the diversification of supply channels and to secure a base for resource development in Siberia," said Ko Kwang-sok, executive director of the Korea International Trade Association.
Russia's rapid economic development is creating new potential for Korean participation in plant and infrastructure construction, such as gas and oil facilities, he said.
When he met visiting Russian Transportation Minister Igor Levitin earlier this month, President Roh expressed hopes for South Korea's participation in Siberian gas and oil development projects in Russia. "Closer South Korean-Russian ties in strategic fields, such as gas and petroleum, would help enhance stability in Northeast Asia," Roh told the Russia minister.
He also voiced hopes for South Korean firms to join the projects to construct oil refineries in Russia. South Korea's Daewoo Engineering & Construction Co. has recently won a reconstruction orders worth $77.5 million part of the construction of Russia's Sakhalin-2 LNG plant.
Staying in Kazakhstan, Roh would seek to finalize a major oil deal with the country. The two nations has signed a memorandum of understanding earlier this year to jointly explore oil fields in the Caspian Sea, one of the world's largest oil reserves. Under the agreement, KNOC would have exclusive negotiation rights for any oil reserves discovered in the Caspian Sea.
In a bid to encourage energy deals, South Korea's state-run trade bank has recently extended relending loan of $40 million to Kazakhstan's bank. "We have decided to extend the relending loan to the Kazakhstan bank as South Korea's trade with resource-rich Kazakhstan is growing rapidly," said Byun Kyu-huck, the chief of the bank's relending loan team.
The loan will be mainly used for Kazahstan's traders who buy South Korean goods, he said. "We hope the loan will help promote brisk energy cooperation with Kazakhstan," he told United Press International.
Officials say Roh's visit would help reduce South Korea's heavy dependence on oil imports from the Middle East. "South Korea seeks to diversify sources of energy imports through participations in energy exploitation projects in Russia and Kazahstan," Energy Minister Lee said. The Seoul government has provided incentives to local refiners that import oil from countries other than the Middle East, part of diversifying oil imports sources.
South Korea has vowed to make more investments to develop upstream oil and gas fields overseas. It brought some 26 million barrels last year from the overseas fields, which accounting for 3 percent of its total import of 805 million barrels. "We hopes to increase the figure 10 percent of annual crude imports by 2010," said Park Jong-won, an oil development official at the energy ministry.
South Korea is now involved in 55 upstream oil projects in 22 countries. Among them, KNOC is now involved in 17 upstream oil projects in 10 countries.
"Given the geographical advantage and Russia's plentiful endowment of natural resources, South Korea and Russia have excellent opportunities for mutual benefit in the area of resource development projects in Russia," said Ko of KITA.
