S. Korea, Nigeria sign major railroad, oil field deal

South Korea and Nigeria agreed Monday to cooperate in a project to modernize the African country's railroad system, South Korean officials said.

South Korean Commerce, Industry and Energy Minister Chung Sye-kyun and Nigerian Oil Minister Edmund Daukoru signed a memorandum of understanding (MOU) in Seoul on the project.

Under the MOU, South Korea will offer long-term, low interest commercial loans to Abuja and have its companies take part in the second phase of Nigeria's railway modernization program in exchange for the African country's transfer of stakes in an operational oil field to Seoul. Oil-rich Nigeria is currently moving to update its extensive rail system by allocating $35 billion in the four-phase endeavor.

The railroad project is estimated to cost US$10 billion and will be the largest single construction project ever undertaken by South Korean builders. It calls for 1,500 kilometers of new standard gauge tracks to be laid on a route linking Port Harcourt on the Gulf of Guinea with Maldugun in Nigeria's northeastern region, via the Nigerian capital of Abuja. China Civil Engineering Construction Corp. won the right to build the first phase of the railroad project that spans 1,315 kilometers and costs $8.3 billion.

POSCO Engineering and Construction Co. has already signed an MOU with Nigeria's Transportation Ministry to build the railroad, while Korea National Oil Corp. will be responsible for operating the oil field.

South Korea is expected to get an operational oil field as a hedge against the low interest, long term loan it will give to Nigeria. Details about the size of the loan and oil field operations will be discussed at a working level.

The MOU is part of South Korea's ongoing efforts to secure overseas oil and gas fields by pledging to build up the power generation and industrial infrastructure of resource-rich countries. South Korea enjoys considerable competitiveness in construction sectors. Seoul wants to raise its self-sufficiency in energy from around 4 percent at present to 18 percent by 2013.

Following the signing of the MOU in downtown Seoul, Chung said that linking oil with railroad construction is mutually beneficial for all parties.

"This is an ideal merger of South Korean engineering knowhow and Nigeria's resources," he said.

This view was echoed by Daukoru, who said cooperation with South Korea is only starting with the agreement. He said Abuja is interested in developing its power generation, telecommunication and other social infrastructure areas.

The deal came after South Korean President Roh Moo-hyun and Nigerian President Olusegun Obasanjo held a summit in Seoul earlier in the day. Daukoru is in Seoul as part of Obasanjo's entourage.

Seoul, Nov. 6 (Yonhap News)