South Korea, Kurdistan Sign Deal Linking Oil, Infrastructure Development
Text of report in English by South Korean news agency Yonhap
[By Lee Joon-seung: "S. Korea, Kurdistan Sign Oil-SOC Development Pact"]
Seoul, Sept. 25 (Yonhap) – South Korea’s state-run oil company on Thursday [ 25 September] signed a pact with the autonomous government of Kurdistan to link oil development with social infrastructure construction in the war-torn Middle Eastern region.
The definitive deal signed in downtown Seoul between the Korea National Oil Corp. (KNOC) and Prime Minister Nechirvan Barzani outlines development rights to eight oil fields in northern Iraq.
It also calls for South Korea to provide US$1.9 billion to finance social overhead capital (SOC) projects.
The two sides had signed a memorandum of understanding in late June, but were unable to seal it because the SOC-building consortium failed to come up with a viable financing plan.
“If there are no companies interested in forming a consortium to build Kurdistan’s infrastructure, the KNOC will engage in the project alone,” a spokesman for the 100 per cent state-owned company said.
He added that the original consortium, made up of Hyundai Engineering and Construction Co., Ssangyong Engineering and Construction Co., is now defunct.
The KNOC will be tasked with investing $600 million in infrastructure up front, with the remainder to be given once oil production begins. In addition to the $1.9 billion worth of funds, the total size of the SOC part of the bilateral arrangement is estimated at $2.1 billion.
Under the production sharing arrangement, South Korea will be entitled to 2 billion barrels of untapped crude oil out of an estimated 7.2 billion barrels that may be in these fields. Trial production should begin in about three to four years.
Of the total, five fields are near Irbil, where South Korea has dispatched troops to help the reconstruction of the country. The deal also includes the Bazian field that is estimated to hold 500 million barrels of crude.
If the KNOC can produce 2 billion barrels of oil from the eight fields, it will push up South Korea’s self sufficiency in crude oil to around 7 per cent from 4 per cent at present.
The country imported 87 million barrels of crude last year with the government pushing to win development rights for oil and gas fields to better insulate the country from sharp fluctuations in international prices.
Originally published by Yonhap news agency, Seoul, in English 0839 25 Sep 08.
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