Iran's publicly stated intention to
advance its nuclear technology threatens a key
element of Japan's energy strategy - development
of the Azadegan oilfield.
Defying
international opposition, Iran announced on
January 10
that
it had resumed uranium-enrichment operations. If
Tehran does not alter its position, Japan could
lose its rights to the field.
As the
international community leans toward sanctions
against Tehran via the United Nations Security
Council, a senior official of the Ministry of
Economy, Trade and Industry explains Japan's
dilemma.
"We want to develop the field at
any cost," the official said. "But opposing
nuclear-weapons proliferation is the national
policy of Japan as the world's only country to
suffer atomic bombings. It's impossible for
Azadegan alone to escape any impact" from the
nuclear issue and possible sanctions.
Chief Cabinet Secretary Shinzo Abe said on
January 13 that Japan supported a call to send the
issue to the Security Council. While joining the
US and Europe in calling on Iran to drop its
nuclear program, resource-poor Japan cannot afford
to lose the development rights.
With
estimated reserves of 26 billion barrels, the
Azadegan field is one of the largest in the Middle
East. Japan's Inpex Corp, in which the government
has a 36% stake, won 75% of development rights in
February 2004.
An Iranian government
official said at the time the agreement was
announced that plans were for southern Azadegan to
pump 150,000 barrels per day (bpd) by mid-2008 and
reach 260,000 bpd by early 2012.
It was a
much-needed enhancement of Japan's energy security
after Arabian Oil Co, a Japanese company, lost its
rights to Saudi Arabia's Khafji field in 2000.
When in full operation, Azadegan is expected to
produce 260,000 barrels a day, boosting Japan's
imports of self-developed oil by 60%.
In
fiscal 2004, Japan imported 4.17 million barrels
of oil a day, of which only 450,000 barrels came
from fields of its own development.
Iran's
nuclear move came just as Inpex was preparing to
begin full-scale development this spring after
land mines from the Iran-Iraq War are removed.
Inpex is also negotiating with France's Total SA
on handing over part of its development rights to
reduce risk, industry sources said.
Its
integration with Teikoku Oil Co is intended to tap
Teikoku's technical expertise to develop Azadegan,
the sources said.
But those efforts could
be nullified by Iran's nuclear ambitions. "The
impact is extremely grave," said Toshihiro Nikai,
minister of economy, trade and industry. "We will
decide how to act in consultation with other
countries."
Some officials of his
ministry, however, are set to go ahead with the
Azadegan project. Even if the Iranian issue were
sent to the Security Council, it would not lead to
a ban on Azadegan development or on imports of
Iranian oil, the officials say.
The
officials are concerned with China's aggressive
push to strengthen ties with Iran, where it
recently won rights to the Yadavaran oilfield.
"Even if Japan gives up Azadegan, China will move
in, resulting in no damage whatsoever to Iran,"
said a senior ministry official. "We should
separate the nuclear issue from oil development."
Pessimism is growing, however, in the oil
industry. "The United States and Europe take the
Iranian move seriously," an industry source said.
"As it stands, it will be difficult to start
drilling."
The government is stepping up
its diplomatic efforts to persuade Iran to drop
the nuclear program. Foreign Minister Taro Aso
phoned his Iranian counterpart, Manouchehr
Mottaki, recently to press for cessation of
nuclear activities.
Aso told Mottaki that
criticism in the international society was far
stronger than Iran thought. But the Iranian
minister stuck to the country's stance, telling
Aso the moves were intended only for research.
At a news conference, Aso did not hide his
irritation over Iran's hardline position. "As it
stands, the issue will surely be sent to the
Security Council. Does Iran understand that?" he
asked.
If the council moves to impose
sanctions, its negative impact will be felt
strongly by Japan. The damage will not be limited
to Azadegan. If the sanctions involve an Iranian
oil embargo, or if Iran, angered by the US and
European criticism, halts its oil exports, it will
hit Japan hard. Iran is the third-largest oil
exporter to Japan, accounting for about 15.9%.
Aso said he would continue efforts to
dissuade Iran from its nuclear development.
Since Washington has said it is seeking a
diplomatic resolution, a senior Foreign Ministry
official said it is unlikely that the council
would immediately impose sanctions.
But
even without sanctions, there are concerns
Washington may call for Japan to stop development
of the Azadegan field, the official added.
