South Korea’s Lee Says Project for Russia Gas Pipeline May Be Speeded Up

Plans to build a natural-gas pipeline from Russia to North and South Korea may be accelerated, according to South Korean President Lee Myung Bak.

“North Korea and Russia are holding talks now and we’re also making progress” on the gas project, Lee said in a panel discussion broadcast on KBS Television in Seoul last night. “Things are likely to progress faster than we expected.”

Korea Gas Corp., the world’s biggest importer of liquefied natural gas, and Russian gas-export monopoly OAO Gazprom have been trying to identify a supply route since at least 2003, when they signed a cooperation accord. Other options include an undersea pipeline, and LNG supplies.

The two Koreas would first have to improve relations that soured last year over the sinking of a South Korean warship and shelling of one of its islands.

“A gas pipeline linking Russia and the two Koreas could prove a turning point for inter-Korean relations,” Hong Joon Pyo, chairman of the ruling Grand National Party, told lawmakers Sept. 7. “The North can earn about $100 million a year to rebuild its economy, while the South can lower its natural gas price by about 30 percent.”

Russia is offering North Korea gas, electricity and railway projects to induce the isolated regime to restart nuclear non- proliferation talks.

Study Project

The regime may agree to the construction of a pipeline from Russia that would carry as much as 10 billion cubic meters of gas a year, Russian President Dmitry Medvedev told reporters last month after a meeting with North Korean leader Kim Jong Il. The countries will establish a joint working commission to study the project, he said.

Lee named on Aug. 30 a former ambassador to China in charge of North Korean affairs, in a move that may signal an easing of policies toward his neighbor before next year’s elections in South Korea.

Russia had sought to sign a deal with China in June on long-term deliveries of the fuel before price disagreements delayed an accord.

“Moscow’s plan for a trans-Korean pipeline may be intended to bring competitive pressure to bear on China as it continues to negotiate prices with Gazprom for Siberian supplies,” Julia Nanay, an analyst at Washington-based PFC Energy, said by e-mail today.

To contact the reporter on this story: William Sim in Seoul at wsim2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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