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Analysis: S. Korea eyes C. Asia energy

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by John C.K. Daly
Washington (UPI) Apr 06, 2008
Record-high energy prices have provoked a global scramble among nations dependent on energy imports to lock in their requirements, in Asia none more so than China and Japan, the world's second- and third-largest oil importers, with daily imports of an estimated 7 million and 5.4 million barrels per day respectively.

East Asia's third economic giant, South Korea, is also involved in the race to secure energy imports and has focused its sights on Central Asia, where it has recently scored a number of successes. As South Korea's oil imports now top 2 million bpd vs. a paltry production of less than 18,000 bpd, Seoul has little choice but to prospect abroad if it is to keep its economy humming. In 2004 South Korea joined the trillion-dollar club of world economies, and its gross domestic product per capita is now equivalent to that of Greece or Spain.

The South Korean government has made explicit its intentions to boost trade with Central Asia, where it will offer financial services and sophisticated IT technology as negotiating tools. As part of Seoul's "energy diplomacy," on March 27 South Korean Prime Minister Han Seung-soo said he will soon visit Central Asia, telling journalists, "In consideration of President Lee Myung-bak's overseas schedule, I'm planning on a trip to Central Asia during May, the first destination in my resource diplomacy. Central Asia is rich in gas, petroleum, minerals and other natural resources, so I'll travel with South Korean enterprises specializing in infrastructure construction. A working-level delegation will visit the Central Asian countries ahead of my departure."

Laying the groundwork for Han's visit, a 30-member South Korean delegation led by Second Vice Minister of Knowledge Economy Lee Jae-hun on March 29 began a trip that will include stops in Kazakhstan, Uzbekistan, Turkmenistan, Azerbaijan and last until April 9. Lee's high-powered team will include officials from the Offices of the Prime Minister and the Foreign Ministry, along with representatives from state-run companies including Korea National Oil Corp., Korea Gas Corp., Korea Resources Corp. and Korea Electric Power Corp.

Seoul has already scored a major success in its energy diplomacy, as during Uzbek President Islam Karimov's February state visit to South Korea, a 50-50 joint venture agreement worth a potential $1.8 billion was concluded between state-controlled energy company Uzbekneftegaz and a South Korean energy consortium, whose members include KOGAS, Lotte Daesan Petrochemical Corp., LG Corp., STX Energy Co. and SK Gas Co. to develop Uzbekistan's Surgil natural gas field.

The joint venture represents a significant coup for South Korea, as Surgil's reserves are estimated at nearly 96 million tons of liquefied natural gas, an amount equivalent to nearly four years of South Korea's LNG consumption.

Seoul's concentration on Central Asia is heightened by the fact that Western energy companies for years have dominated traditional exporting markets such as the Middle East, effectively shutting out the later-developing East Asian economies from securing major access. In contrast, Central Asia, while rich in natural resources including oil, natural gas, coal and uranium, is attractive to East Asia because post-Soviet tension between Washington and Moscow has largely stymied the efforts of major Western resource developers to make significant inroads there.

In rising petro-state Kazakhstan, Seoul also has an inside advantage that Western companies lack -- a Korean population, the descendents of thousands of Koreans deported there by Stalin, currently estimated by Kazakhstan's Bureau of Statistics to make up 0.7 percent of the population. Last September South Korean President Roh Moo-hyun said, "Kazakhstan is a good example as a multiracial nation, as about 130 different peoples live together there in harmony. I deeply thank the government and people of Kazakhstan for kindly accepting the Korean nationals as friends. I also expect the ethnic Koreans living in Kazakhstan to serve as a bridge of friendship between the two countries."

In Turkmenistan and Azerbaijan, South Korea will face an uphill struggle. In Turkmenistan, South Korea is joining the mad scramble to exploit the country's vast natural gas reserves, effectively denied to the world community until the death of Turkmen President Saparmurat Niyazov in December 2006. His successor, Gurbanguly Berdymukhamedov, has shown a greater willingness to open up to the outside world, but for the moment both Russia and to a lesser extent China seem to have the inside track. As for Azerbaijan, the 1990s "deals of the century" effectively put the development of the country's hydrocarbon reserves under control of U.S. and European consortiums for the foreseeable future.

Seoul has a final negotiating ace up its sleeve -- its nuclear expertise. South Korea meets 45 percent of its electrical needs from nuclear power, and Han will actively promote the export of South Korean atomic reactors in partnership with the United States and other countries. As Kazakhstan is estimated to contain the world's second-largest uranium reserves, estimated at 1.5 million tons, and Uzbek total uranium reserves are estimated at 55,000 tons, South Korea sees great potential for expanding cooperation. In Uzbekistan, Seoul will be able to build on a September 2006 bilateral agreement allowing South Korea to import directly from Uzbekistan 300 tons of uranium annually between 2010 and 2014 and a joint venture agreement signed the same month between the Korea Resources Corp. and Goskongeologiia to develop the Dzhantuar uranium deposit in the Navoi region's Kyzyl Kum desert. If the South Korean negotiating teams accomplish even a fraction of their ambitious agenda, they will doubtless be received upon their return as heroes.

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