Korean Energy Economic Review ISSN:1599-7057(Print) 에너지경제연구

In this paper author calculates the price of gas for the planned gas supply project from Russia to Korea. That price includes: the gas production cost in the prospective gas fields in Russian East regions, gas pipeline transportation cost across Russia to the Pacific coast, and further gas transportation by gas pipeline through the Korean Peninsula or transportation of gas by tankers as liquefied natural gas (LNG), to the Korean consumers. It also includes expected minimum return rates of investment (hurdle rates). Our calculations show that the estimated prices of Russian gas in Korea in 2010 US constant dollar during the period of the possible contract from 2017 to 2041 could be as follow: for PNG (pipeline natural gas) 12.91 $/MBtu (468 $/1000m3), and for LNG 13.22 $/MBtu (479 $/1000m3), which is rather competitive with the projected oil price between 18.37 and 25.79 $/MBtu or 106 and 150 $ per barrel of crude oil for the same period of time. This suggests that supplying Russian natural gas to Korea is cost effective in either PNG or LNG form.