Archive for the ‘Natural Gas’ Category

Stratgeic alliances in North East Asia: Railways, ports, and energy

Tuesday, March 4th, 2008

Writing in today’s Asia Times, Dr. Leonid Petrov analyses the complexity of Russia, Rok, DPRK, and Chinese relations:

Russia and North Korea:

Territorial claims, in one form or another, involve almost all countries adjacent in this region with the exception of Russia and Korea. The Joint Russian Federation-DPRK Commission for the Demarcation of State Borders has recently completed its work by documenting and marking the 17-kilometer frontier. This strip of uninhabited and swampy land in the mouth of the Tumannaya (Tuman-gang) River plays an exceptionally important geopolitical role. It not only provides the two countries with land access to each other, but also prevents Chinese access to the East Sea (Sea of Japan).

China and North Korea: 

Here, some 50km north of the small port that forms the core of North’s Rajin-Seonbong Special Economic Zone, the interests of Russia and China are now at stake. Russia is rapidly repairing the railroad track, and China (in a similarly speedy manner) is constructing a new automobile highway, both leading from their respective borders to the port of Rajin. Russia, investing at least 1.75 billion rubles (US$72 million) into this project, seeks to strongly connect Rajin (and the rest of northern Korea) to its Trans-Siberian Railroad. China, in turn, hopes to divert the growing cargo traffic to its own territory, offering the efficient network of railroads for delivery of South Korean and Japanese goods to Central Asian and European markets. What position will the government of North Korea take in this clash of ambitions?

Russia and South Korea (energy and trade):

In 2007, the volume of the export of “black gold” from Russia to South Korea reached 38.13 million barrels (2.7 times more than in the previous year). The relative proximity of the Russian oil and gas fields is an attractive factor for Korean companies who actively search for alternatives to Middle East oil suppliers. This year South Korea will for the first time start importing natural gas from Russia. The expected volume of delivery during 2008 is 1.5 million tons (or 5.1% of South Korea’s annual demand).

and

Trade relations between Russia and Korea are steadily growing. According to customs statistics, last year Russia recorded the sharpest increase of South Korean imports (56.2% more than in 2006). Due to the inflow of “petro-dollars” the new class of nouveaux riches in Russia began actively buying Korean automobiles, cell phones, television sets and LCD monitors. South Korea exported to Russia goods worth US$8.1 billion (including $3.296 billion of automobiles, $859 million of mobile phone equipment, motor vehicles and spare parts worth $659 million). As for trade with North Korea, in 2006 Russia occupied third place after China and South Korea and absorbed 9% of the total $3.18 billion spent by the North on imports.

More on Russia/South Korea energy talk here. 

The whole article deserves reading here:
Russia lays new tracks in Korean ties
Asia Times
Leonid Petrov
3/5/2008

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Train Explosion in Hyangsan

Wednesday, December 12th, 2007

Daily NK
Jung Kwon Ho
12/12/2007

A source in North Korea informed the Daily NK on the 11th that there was a train explosion incident in Hyangsan, North Pyongan on November 12th that left 8 passengers dead.

The source said that “The train, traveling between Pyongyang and Manpo, was carrying a shipment of butane gas tanks when it suddenly burst into flames. It is speculated that the explosion resulted from a cigarette that was lit in the vicinity of a gas leak coming from the tanks, however this has yet to be confirmed.”

People use butane gas for lighters in North Korea and can refuel lighters at street stalls everywhere.

The source relayed that the Rail Safety Agents are undergoing interrogation, suspected of taking bribes in return for allowing traders to load butane gas tanks on the train. The wounded passengers were taken to the People’s Hospital of Hyangsan for treatment of their injuries.

According to the source this is the second serious explosion since last July. The first occurred at the “January 20 Munitions Factory” located in Eundeuk, North Hamkyung Province. Resulting from the ignition of large stores of gunpowder, it produced mass casualties.

The January 20 Munitions Factory manufactures trench mortars, cannon balls, anti-tank guided missiles and bombs for aircrafts.

The source reported that around 50 workers having their lunch died in the factory and around 100 workers were wounded. However, the numbers were relatively small considering that most of the workers had left the factory on their lunch hour.

Party authorities in Eundeuk considered this incident to have been the work of spies and started educating workers on anti-socialist activity. However, the explosion was later found to have been caused by an electrical fault.

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Two Koreas discuss oil exploration at summit

Friday, October 5th, 2007

Yonhap
10/5/2007

Leaders of the two Koreas discussed issues relating to oil field development and exploration at the latest summit in Pyongyang, South Korea’s top economic policymaker said Friday.

“The oil development issue was discussed at the summit, and North Korean leader Kim Jong-il expressed keen interest in the South’s oil field and gas exploration projects,” Finance Minister Kwon O-kyu said in a press briefing.

“South Korea also discussed the development of resources in North Korea, including oil fields.”

Kwon said the oil development issue may continue to be discussed at talks of the proposed Joint Committee for Inter-Korean Economic Cooperation, a committee to be formed through upgrading the status of the existing Inter-Korean Economic Cooperation Promotion Committee in an effort to accelerate bilateral economic cooperation.

Kwon played down concerns about potential financial burdens on the government from proposed inter-Korean business projects.

At the three-day summit, ended Thursday, the two Koreas agreed on a range of cross-border business projects, including creation of a special economic zone at the North’s western port city of Haeju, development of an existing port of Haeju, and expansion of an industrial complex in the North Korean border town of Kaesong.

The two also agreed to jointly repair and maintain the North’s dilapidated expressway linking Kaesong and Pyongyang, as well as the North’s railway between Kaesong and Sinuiju on the North’s western Chinese border.

The two countries also decided to construct an inter-Korean joint shipbuilding complex in Nampo, near Pyongyang.

South Korea will be able to finance the development of Haeju port through a proposed 2 trillion won (US$2.2 billion) overseas port development fund, which will be created by the nation’s port authority, Kwon said.

In a related note, Maritime Minister Kang Moo-hyun said in a meeting with reporters that about 220 billion won will be spent for the development of the port which will have eight berths, including two container berths.

The government will also able to attract international cooperation for repairing the railways since it is part of a wider international railway project of Trans-Siberian Railway, he said.

South Korean shipyards, which hold a combined 45 percent share of the global market, by investing in the envisioned shipbuilding complex will be able to maintain their competitiveness through access to North Korea’s cheap labor, Kwon said.

In case of the summit’s impact on domestic financial markets, Kwon declined to make concrete predictions, but said rising expectations of improving profitability and competitiveness by domestic businesses might be able to boost investor spirits.

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Russian merchants greatly increasing in Pyongyang

Thursday, April 5th, 2007

Daily NK
Han Young Jin
4/5/2007

On the 30th, Huanqiushibao, an international affiliated magazine of the Chinese People’s Daily, noted the above statement on Russia’s recent movement to invest in North Korea.

The paper said, “The Russian natural fuel gas business has already completed the preparation for providing energy support and is planning to manufacture petroleum in North Korea.”

“Russia has pioneered the Chungjin-Siberia railroad for a long time” and “if they retain the Eurasia continental rail, then they will gain an annual economic profit of four hundred million dollars,” the paper commented.

Further, the paper said that “Russia is finishing its preparation of surplus concentration in the Wondong (Far Eastern region) to export to North Korea.” As a provision of support to invest in North Korea, Russia is also driving the construction of the Kraskino-Chungjin 50,000 kv railway line for exporting Korea remodeling business and concentration of energy in Wondong to three thermal generating plants in the North.

The paper relays a Russian economic expert’s voice to expand investment in North Korea

Prekofts, Russia’s Wondong Economic Research Institute Chair, said, while emphasizing the importance of investment expansion, “We cannot limit items to invest in North Korea to resource and energy areas. China has already built a glass factory in North Korea. Why can’t we do what China is doing?”

Russia Considers Cancellation of 80 percent of North Korean debt

The paper said, “According to the numbers of the Russian government authorities, the 2006 trade figure with North Korea amounted to 210 million dollars and has been reduced by 13 percent compared to the previous year.” In the midst of such a situation, Russia has sufficiently considered the development potential of the North Korean market and is establishing a plan to encroach on the market according to the forecast that “it will be advantageous for the pre-acquiring party.”

According to the paper, President Putin commented, “The economic power with the world’s fastest rate of financial progress is overwhelmingly the Asia-Pacific region.”

The paper also said that because Russia considers of importance the strategic position of North Korea for connecting Europe and Asia-Pacific countries, it has considered the forward-looking way of remitting 80 percent (64 hundred million dollars) of North Korea’s 80 hundred million dollar debt.

The current system of exchange between North Korea and Russia is the former exporting labor power and agricultural goods and latter exporting energy, oil, and raw materials.

The paper reported that there has been opposing public opinion regarding Russia’s investment in North Korea. Because North Korea is not economically well-off, short-term recovery of investment gains is difficult.

The paper pointed out that a Russian merchant Merikonoft, who engages in international trade, said the following, “I do not have immediate plans to invest in North Korea. North Korea does not have laws for protecting foreign capital, so doing business is a type of exploration.”

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North Korean energy trade with China

Tuesday, August 1st, 2006

Nautilus Institute
Nathaniel Aden
August 2006

Paper here: Nautilus-Aden.pdf
web link here

Abstract:  China is North Korea’s largest international trading partner. Since 1995, energy and fuels have dominated bilateral trade between allies.  North Korea is a net importer of Chinese crude oil and oil products; however, it became a net exporter of electricity and coal to China in 2003.  Whereas North Korean coal and electricity exports are sold at sub-market “friendship prices,” Chinese coal and oil products have been sold to North Korea at premium prices.  Over the past ten years, North Korea’s imports have become increasingly energy-intensive, while exports have become more labor-intensive.  Chinese customs data suggest that Beijing is taking a pragmatic, market-oriented approach to trade with its reclusive neighbor, while the increasingly asymmetrical energy embodiment of bilateral trade may reflect dilapidation of North Korea’s non-military industries.

Bullet Points:
1.  In 2005, bilateral trade with the PRC accounted for 39% of North Korean international trade by value.

2. North Korean trade data are compiled by partner-country Customs Bureaus, the United Nations, and the Internaitonal Monetary fund (IMF).  China and South Korea provide the best “mirror” statistics.  Customs data do not include aid shipments, official development assistance, direct government transfers, foreign direct investment, services, remittances, barter trade, smuggling, illicit trade, trade in military equipment.

3.  The DPRK has spent an increasing amount of money on diminishing quantities of energy imports, particularly Chinese crude.  The decline of energy import volumes in the face of increasing overall imports and trade may reflect demand sensitivity to increased international market prices and/or North Korea’s lack of hard currency with which to purchase imported energy and fuels.

4. The DPRK has significant, ongoing refining capabilities.

5. Between 1985 and 2002, the DPRK domestic coal production has declined from 37.5 million tons to 21.9 million tons.  Nonetheless, North Korea increased its export quantity to 2% of total domestic production since 2002. 

6.  Starting in May 2005, North Korea has been an uninterrupted monthly electricity exporter.  Hydropower may account for much of the DPRKs surplus electric power.

7.  Energy prices reflect the pragmatic, market-oriented character of China’s economic relationship with North Korea.  North Korea may be providing China coal at subsidized prices, below those of China’s other trading partners.

8.  North Korea coal export prices show an awareness of market prices starting in 2002.

9.  The DPRK has consistently paid premium prices for Chinese oil product exports over the last ten years.

10. Aside from politically-determined prices, several conditions could explain this: 1.  Real factors (transport costs, demand, goegraphy) 2. Pyongyang’s insulation from market realities 3.  No DPRK leverage.

11. In 2005, North Korea imported $2omillion worht of trucks, $2 million worth of cars, $1 million of tractors.  The transport sector has not grown significantly since 1995.

12.  Shift of DPRK trade towards energy-intensive imports and labor-intensive exports suggests deterioration of non-military industry.

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All about DPRK energy…

Wednesday, February 1st, 2006

A report issued by the Department of Energy: dprkenergy.pdf

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The Nautilus Institute primer on the DPRK

Tuesday, November 26th, 2002

Here is the main page

The Nautilus Institute has created the DPRK Briefing Book to enrich debate and rectify the deficiencies in public knowledge. Our goal is that the DPRK Briefing Book becomes your reference of choice on the security dilemmas posed by North Korea and its relations with the United States. The DPRK Briefing Book is part of the Nautilus Institute’s “US-DPRK Next Steps: Avoiding Nuclear Proliferation and Nuclear War in Korea” project.

The completed DPRK Briefing Book will cover approximately two-dozen “Policy Areas,” each containing issue briefs, critical analyses from diverse perspectives, and key reference materials, some of which are available as PDFs. (To view the PDFs, you will need to download and install the free Adobe Acrobat Reader). We will post additional Policy Areas over the coming months. If you would like to be notified as they are completed, please sign up for NAPSnet, if you haven’t already.

The Nautilus Institute seeks a diversity of views and opinions on controversial topics in order to identify common ground. Views expressed in the Briefing Book are those of the authors and do not necessarily reflect the official policy or position of the Nautilus Institute. The information contained in these pages may be downloaded, reproduced and redistributed as long as it has not been altered and is properly attributed. Permission to use Nautilus Institute materials for publications may be attained by contacting us.

Here are sections of interest:

About DPRK, Agriculture, China, Economy, Energy, Transition

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