Russian gas deal moving ahead
2003-8-14Reuters
    Russia, China and South Korea will sign a trilateral deal in October to finance a study of Russia’s first gas pipeline to Asia from the giant Siberian Kovykta field, a key player in the project said. 
    The deal will be a milestone for the $10-$14 billion project, which is led by global oil major BP.
    The project had seemed under threat over the last few years due to lack of support from the Russian government and opposition from gas monopoly Gazprom.
    "We expect the trilateral agreement to be signed in October in Irkutsk (in Russia’s eastern Siberia). The three parties will commit to finance the main international feasibility study of the project," a spokesman for Russia’s oil firm TNK said Wednesday.
    TNK, together with BP and Russia’s metals and banking group Interros, owns Rusia-Petroleum, a firm which controls Kovykta, estimated to hold two trillion cubic meters of gas reserves.
    The project provides for a 4900-km pipeline from Kovykta to bypass Mongolia and run via China’s Harbin to Beijing with a possible extension to South Korea under the Yellow Sea.
    It is designed to ship 20 billion cubic meters of gas a year to China and 10 bcm to South Korea starting 2008.
    The TNK spokesman said the trilateral deal would be signed between Rusia-Petroleum, China’s state firm CNPC and South Korea’s state firm Kogas, but added it was not immediately clear whether the deal would be supported by the Russian government.
    Gazprom has said it will oppose the export plan as it would break its monopoly. The Russian giant, the world’s largest gas producer, demanded a stake in the project without specifying how much it was ready to pay.
    Gazprom has also offered a plan under which gas from Kovykta would be shipped inside Russia, where prices are capped by the state at only a fifth of free export prices. Gazprom would instead build a link to China from more remote fields in Eastern and Western Siberia.
    The government, however, slammed the plan in June saying it would guarantee BP a favorable investment climate in the gas sector and defend it against pressure from Gazprom.
    This year BP became the largest overseas investor in Russia after it agreed to buy a 50-percent stake in TNK for $6 billion.
    The TNK spokesman said a decision on whether Gazprom could take part in the project would be taken only after the trilateral deal was signed. "At the moment Gazprom participates only as an observer in our project," he said.
    Analysts, however, said the project could still face problems as Gazprom was unwilling to share its export monopoly.
    "While the agreement could be viewed as the all clear for the development of Kovykta, Rusia faces serious hurdles ahead. Gazprom, which holds monopoly rights on all Russian gas exports is likely to oppose the pipeline unless it can participate," said UFG brokerage.
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