A South Korean consortium led by state-run Korea National Oil Corp. (KNOC) had signed a contract to take over the stake from Russia's state oil firm Rosneft, the operator of the block in the Sea of Okhotsk off the Western Kamchatka peninsula, KNOC said in a statement. Rosneft now holds the remaining 60 percent stake. The deal is part of KNOC's drive to invest in energy projects abroad for Korea, which has been keen to boost its overseas energy-producing assets to improve security of supply. Preliminary exploration work by the Russian Resources Ministry has shown the block, covering 62,680 square metres (674,700 square feet), holds 3.7 billion barrels of probable oil reserves, KNOC said, enough to satisfy South Korea, the world's fourth-largest crude importer, for almost five years. "Once the block proves commercially viable, we believe it will help stabilise our supply of energy substantially as it is geographically close to our nation and all the product from the block will be exported," KNOC said. KNOC and Rosneft planned to start drilling work in 2007 and drill three test wells in 2008 at the block to estimate reserves and come up with detailed development plan, the KNOC said. Seoul imports nearly all of its crude oil needs, almost 80 percent of which is sourced from the volatile Middle East. HUNT FOR RUSSIAN ENERGY The signing of the contract, which marks Korea's first inroads into resource-rich Russia, came more than a year after KNOC and Rosneft signed a memorandum of understanding during South Korean President Roh Moo-hyun's visit to Moscow. Seoul had been a latecomer in the latest rush for vast energy resources in Russia, a focal point for competition among import-dependent oil consumers in Asia. Japan and India are heavily invested in Russia's Sakhalin projects, which will start pumping more substantial crude oil for exports next year, while China has been strengthening relations with its giant neighbour to the north. China and Japan, the world's No.2 and No.3 oil consumers, are also competing for supply from a major oil pipeline project linking Siberia and the Pacific coast. "Oil prices went up and up, and are forecast to keep rising, prompting countries like China and India to competitively scout for foreign energy assets," said Lee Sung-kyu, an economist at state-funded Korea Energy Economics Institute (KEEI). "The competition is getting more severe as China and India are sweeping away lucrative energy assets with higher bids. There'll be nothing left for Korea unless it becomes pro-active." After a slow start, a KNOC-led group won a tender in August to invest in 2 billion-barrel oil blocks in Nigeria, wooing Abuja with the promise of huge infrastructure investments. But it has far to go to catch up with China and India, who have snapped up a series of assets from Ecuador to Angola. The South Korean government said this year it aimed to raise crude oil and gas output from its energy projects abroad to 550,000 barrels per day by 2013, up five-fold from last year. The country is involved in 57 upstream oil or gas developments in 26 countries, with producing fields in Vietnam and Yemen its biggest projects. The Korean consortium includes KNOC with 50 percent, while state-controlled gas monopoly Korea Gas Corp., oil refiners SK Corp. and GS Caltex Corp. as well as Daewoo International Corp. hold 10 percent each, KNOC said. Trading firm Hyundai Corp. and petrochemicals maker Kumho Petrochem have 5 percent each, it said. PIN/REUTERS