The Kapitan Gotsky, a Korean-built ice class tanker for Russia's Sovcomflot. © Craig Eason

South Korea has an icebreaker and a polar research program with a station at Ny-Alesund. It has applied for observer status in the Arctic Council. Soon, it may also build a liquefied natural gas (LNG) terminal in the Northwest Territories.

This past January, executives from the Korean Gas Corp. (KOGAS) visited Inuvik, NWT to consider the possibility of building a terminal in Cape Bathurst, located northeast of the Umiak SDL 131 gas field in the Mackenzie Valley Delta. Canada’s MGM Energy has a 60% stake in the field, which is estimated to hold 328 billion cubic feet (bcf) of LNG. In December 2010, KOGAS bought 1/3 of that stake, or 109 bcf, for $30 million, giving it 20% ownership of the field. This energy deal – the first ever in the Arctic by a South Korean corporation – will provide the country with 1.45 million tonnes of LNG, which equals approximately 5% of the country’s annual imports. South Korea is second in the world in terms of LNG imports, after Japan. KOGAS is planning to begin exporting the gas from the Umiak field in 2020.

A statement from Korea’s Ministry of Knowledge Economy read, “This investment by KOGAS is significant as it is the first resource development in the North Pole by a South Korean firm, which will establish a bridgehead to enter the promising frontier.”

In an article by the Globe and Mail, the mayor of Tuktoyaktuk, Mervin Gruben, “They were even willing to help us get natural gas into Tuktoyaktuk…Our own government can’t do that, but a foreign country wants to help us. They’re good people.”  The mayor’s statement reveals how many Northerners view Ottawa with disdain, as it is perceived as shoving aside day-to-day concerns of residents in favor of big, headline-grabbing expenditures on military sovereignty. To top that off, the Mackenzie Valley Pipeline project has been in the works for decades, but it is still doubtful whether the pipeline will ever be laid. As such, the Koreans are considering an alternative production strategy: converting the gas to LNG, and then shipping it to their country from an LNG terminal. If the plan is successful, this could further discourage construction of the pipeline. Transporting it from an existing facility could be seen as a no-brainer, rather than building more expensive infrastructure when the price of gas is so low. Indeed, some have championed the construction of an LNG terminal near the Delta for years. Additionally, the gas could reach more markets via ships instead of a fixed pipeline. Of course, even if an LNG gas terminal is built, it would not be for several years – but neither would the MVP. But the construction and operation of a terminal would certainly be a boon to the territory.

The logistics of shipping LNG out of Cape Bathurst year-round have yet to be worked out. One, as the Globe and Mail article points out, a new type of icebreaker would have to be built that could withstand multi-year sea ice. This would cost $700 million and would be a much stronger and more advanced icebreaker than what the Canadians have on hand. In comparison, the Koreans’ existing research icebreaker, the Araon, which began operating in 2010, cost 108 billion won (approximately $100 billion) to build. It has a 3.9 centimeter thick prow and stern, whereas a ship capable of carrying LNG in all four seasons would need a 10-centimeter thick hull. Yet South Korea already has the expertise necessary to construct such an icebreaker. Not only did Samsung Heavy Industries help to construct the Araon: it also built three icebreakers able to break through 1.5 meters of ice for Russia’s Sovcomflot shipping company. These tankers are used for shipping crude oil from Lukoil’s Varandey terminal on the Pechora Sea to Murmansk, from where the oil is shipped out to different locations in Europe and the United States. In 2004, 11 of the 17 ice-class tankers ordered that year around the world were placed with SHI, giving it a 65% share of the global market. In 2005, the CEO of SHI said,

“”The polar region-running icebreaking tanker market is a blue ocean for us. We will further strive to take lead in the icebreaking LNG ship construction market as another alternative for crude oil transportation ships.”

Second, shipping the LNG would require breaking through sea ice above Alaska, which could prove controversial. The icebreaker would then sail down through the Bering Strait to South Korea.

Korea’s geographical location from the Arctic may be relatively far, but its interests are clear. Whereas other countries are concerned with sovereignty and militarization, Korea merely seeks a stable political and regulatory environment so that it can export resources from the region and build ships for that very activity. Melting ice might help its plans, too. In a way, Korea’s plans for the Arctic benefit from the country’s clarity of purpose in the region. Whereas other countries like Canada, the U.S., and Denmark must balance the interests local and national governments, indigenous peoples, industry, and environmentalists, Korea simply sees the Arctic as a space for scientific research and economic development.

News Links

“South Koreans eye Arctic LNG shipments,” Globe and Mail

“Canada: KOGAS to buy stake in Arctic gas reserves from MGM Energy,” Energy-pedia

“KOGAS buys 20% stake in MGM Energy’s Canadian Arctic gas reserve,” Gas Matters Today

“SHI makes inroad to icebreaking tanker market,” Samsung Heavy Industries

“LNG option puts Mackenzie at a disadvantage,” Edmonton Journal

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South Korea’s growing role in Arctic economic development

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