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Dollars and Uncle Sam: Why Korea refused to work with Rosneft in the Arctic
Material posted: Publication date: 01-07-2017
Onbrasenia hydrocarbon prices and Western sanctions are making it much more difficult for Russian companies developing offshore fields. Especially those located in the Northern seas. The lack of the necessary for exploration and production of oil and gas technologies "Rosneft" could be addressed by involving partners from South Korea. However, as it became known to Life, local business is not eager to invest in Russian projects in the Barents, Pechora sea and the Black sea.

Ongoing sanctioned "crusade" on Russia have forced Moscow to deploy gaze from West to East. First of all we are talking about changing the vector the trade "our everything". Simply put, oil and gas. Not surprisingly, the focus is on the so-called "Asian tigers" — China, Japan and South Korea. However, to get the most from relationships with them in Moscow again does not give the US and its European allies.

As it became known to Life from the sources in the Ministry of industry and trade, Rosneft failed to agree with the Korean national company KOGAS on joint exploration on the Russian continental shelf.

— Experts of the Korean company took part in the “data room” organized by “Rosneft” on sites in the Barents, Pechora and Black seas — told Life close to the source. — After reviewing the materials KOGAS expressed interest in cooperation on these projects.

Also the source of life noted that "Rosneft" has expressed readiness to offer the South Korean partners to consider potential participation in the "four permanent and six receivable stations "Rosneft". However, about the reaction of Seoul, this option is not yet known.

Why "Rosneft" Koreans?

Company Igor Sechin wouldn't have been one of the largest oil producers on the planet, if not continued work to increase the resource base. The greatest potential in this sense is the continental shelf. If we talk about the South of Russia, the Rosneft works in all three possible directions: the Azov, Caspian and Black seas.

Will focus on the latter. After all, there "Rosneft" wanted to invite KOGAS. Despite the huge resource potential of the region, exploration sites is with a "squeak". The main reason is the large depth of the location of "points" (up to 2.2 km), and the need to use a special technique, which is resistant to sea water with a high content of hydrogen sulfide.

On the continental shelf seas of the Western Arctic (including as the Pechora and the Barents sea), "Rosneft" has 19 licensed sites. According to information on the official website of the company, the total recoverable resources are estimated at 18.4 billion tons of oil equivalent (as of January 2016). And this is without the resources of the site Gusinoozersky estimated at 356 million toe

Work in the Northern seas also is not cheap. Take, for example, the field "Victory" adjacent to the Barents Kara sea. Drilled there hole "Universitetskaya" demanded a record investment of more than $1 billion According to the original plan of "Rosneft" there was supposed to be built at least 15 similar platforms. However, the pace had to slow significantly because of the advent of low oil prices and Western sanctions.

The reason for the latter to cease work at all (with the exception of the "Sakhalin-1") joint with "Rosneft" projects, said ExxonMobil, which is led by current U.S. Secretary of state Rex Tillerson. Thus, the company Sechin has lost not only financial support, but also opportunities to use advanced technologies of Western partners.

All shelf projects "Rosneft" was developed with the help of foreigners, — noted in conversation with the Life the teacher of Financial Academy under the government of the Russian Federation Igor Yushkov. — Drilling in the Kara sea, the company carried out with the help of the Norwegians and ExxonMobil. If you look at "Sakhalin-1" and there is also more and more with foreigners is implemented. All that relates to offshore production in Russia is poorly developed. "Rosneft" the right technology for the work on the shelf.

These same technologies that apparently, Russia and was going to obtain through cooperation with the Koreans. At least, they could attract money from cooperation with KOGAS. However, according to experts, a great contribution to "cautious" attitude of Koreans to the projects of "Rosneft" has made an impact on them historic friends from the USA.

— I do not think that KOGAS could be a serious technology partner, says Life Director General for gas problems national energy security Fund Alexei Grivach. — This company is an importer of gas, as a major client, the representative of the market — a guarantee of funding and no more. If we talk about Korean history (KOGAS talks and “Rosneft”. — Approx. Life), here root theme was funding and the possible participation of Korean shipbuilders in implementation of projects. The Koreans may have realized that investing without technology is meaningless. And maybe even the discussion did not reach specific things. Without a technology partner to spend money useless. Plus, of course, a serious political influence of the United States.

So close far East

However, in addition to fear of "upsetting" his friends from USA the failure of Korea's cooperation on the proposed Rosneft directions can be motivated by the fact that projects in the seas of the Western Arctic not too interesting Asians in economic terms. One thing geographically close "Sakhalin-1" and the Barents sea. In addition to the obvious logistical problems, it is necessary to take into consideration and too low prices for hydrocarbons.

It is not clear what could bring Koreans cooperation with Rosneft in the Northern seas — surprised Yushkov. Even if we reject the question of sanctions is purely economically to invest in some project in the Barents sea is not too profitable. Cost of production there will be high. Accordingly, low profitability of the project. If the cost of oil at $45-50 per barrel there just for the economy do not beat. Besides the Russian shelf of the prevailing gas. For our companies it's very sad, because oil is more marginal product than gas.

Despite this, interest of Seoul to gas (already significant) in recent years has grown substantially. The new President of South Korea, moon Jae-In, elected in may this year, after the impeachment of her predecessor, Park Geun-Hye has hinted at a possible increase in imports of liquefied natural gas. Primarily due to the decrease in procurement is much less environmentally friendly coal.

In particular, the President called for an increase in load factor gas-fired power plants and the easing of import duties on CNG. Thus he hopes to increase the share of natural gas in the energy mix of South Korea from the current 18% to 37%. According to research by Wood Mackenzie, the new policy of Seoul would require an increase in imports of liquefied natural gas by 8 million tonnes a year by 2025. This can bolster the flagging demand for LNG spot prices over the past three years has lost 75%.

Moreover, we note that Korea even with the current turnover is the second after Japan LNG importer. By the end of 2016, according to statistics of the International group of importers of liquefied natural gas (IGLNG), Seoul purchased abroad 34,19 million tons of LNG. Therefore, for Russian miners much more realistic option is to engage our Korean partners to cooperate on far East projects. Speaking in favor of this and a lot of interest Seoul in this direction, and the lack of sanctions pressure, which applies only to work in the Northern seas.

— "Sakhalin-1" and "Sakhalin-2" are not developing, says Yushkov from the Financial Academy. Gazprom wants to build the 3rd turn of an LNG plant, but he had problems with the resource base. He wanted to buy the gas produced in the framework of the "Sakhalin-1". But it was opposed by Rosneft and Exxon Mobil. They want to build a plant there. Then they pushed from Sakhalin and they moved the plant construction project in Khabarovsk Krai. But here, everything is in limbo. They like and the resource base is there, but obscure the profitability of the new plant. In these projects, "Rosneft" could attract Koreans. With "Sakhalin-1" there is a shipment to Korea, Japan and China. They love it because of the short transport shoulder, low prices and high quality products.

Ilya Bulaev


Tags: Russia , Arctic , oil

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