Russia's Gazprom, NKorea sign outline pipeline deal

15th September 2011, Comments 0 comments

Russia's natural gas giant Gazprom said on Thursday it had signed a draft deal with North Korea's visiting oil minister concerning the development of a new pipeline to the South.

Gazprom said in a statement the memorandum was signed in Moscow by North Korea's Oil Minister Kim Hui-Yong and Gazprom chief Alexei Miller.

"Among other things, the sides agree to create a joint working group for implementing the project and developing other promising areas of cooperation," the Gazprom statement said.

The long-discussed pipeline would carry Russian gas through the Stalinist republic to South Korea's booming market.

The pipeline returned to the headlines last month when the North's leader Kim Jong-Il reportedly gave it his backing during a summit in Russia with President Dmitry Medvedev.

The world's largest natural gas producer has been keen to expand its Asian sales and has been supplying liquefied natural gas (LNG) to South Korea since the Sakhalin-2 project went online in the Pacific in 2009.

But most of the Sakhalin-2 gas is sent directly to Japan and Gazprom has struggled to come up with a cost-effective strategy of improving its South Korean presence because of the diplomatic isolation of the North.

The proposed pipeline promises to reduce South Korea's gas bill and would provide the North with much-needed transit revenues.

Yet high cross-border tensions between the two Koreas threaten to derail the scheme.

The Gazprom statement said the two sides "noted the importance of providing all-round support for the gas pipeline's construction from the two contries' governments."

The agreement was reached as the head of South Korea's state gas company held a separate round of talks with Miller about the pipeline.

The South Korean embassy in Moscow could not confirm if Korea Gas Corp president Choo Kang-Soo also met with the visiting North Korean delegation.

© 2011 AFP

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