Qatar, Japan's energy white
knight By Hisane Masaki
TOKYO - Qatar is expected to emerge as a
country that holds the key to Japan's future
energy security as it becomes the country's
biggest supplier of liquefied natural gas (LNG)
around 2010.
During his recent visit to
Tokyo, the Qatari energy and industry minister
said the Persian Gulf state plans nearly to double
LNG exports to Japan by 2010. This news has come
as a godsend for Japan at a time when Indonesia,
its current No 1 supplier of LNG, is considering
cutting in half shipments to the country from
2010. At the same time, Japan and Russia remain at
odds over the
Sakhalin-2 oil-and-gas
project in the Russian Far East.
Japan is
the world's largest importer of LNG, purchasing 58
million tons from abroad in 2005, of which 25% was
from Indonesia. Qatar was Japan's fourth-largest
LNG supplier in 2005, after Indonesia, Malaysia
and Australia, accounting for about 11% of Japan's
total imports. Qatar, which has the world's
third-largest proven gas reserves after Russia and
Iran, with 25.78 trillion cubic meters, is set to
become the world's top exporter of LNG.
Japan is also the world's second-largest
crude-oil importer, after the United States. Japan
imports almost all of its oil, about 90% of which
comes from the Middle East. Qatar is also Japan's
fourth-biggest crude-oil supplier, after Saudi
Arabia, the United Arab Emirates and Iran.
While Japan's oil imports from Iran have
been on the decline this year, its imports from
Qatar are on the rise. The Ministry of Economy,
Trade and Industry said last Thursday that Japan's
October crude-oil imports by refiners and trading
houses totaled 18.91 million kiloliters, or 3.84
million barrels a day. By country, Qatar was the
third-largest supplier, after Saudi Arabia and the
UAE, shipping 2.22 million kiloliters in October,
up 5.3% from the same month of 2005. Iran slipped
into fourth position, shipping 1.91 million
kiloliters, down 26% from a year earlier.
Qatar's early Christmas
present Qatari Energy and Industry Minister
Abdullah bin Hamad al-Attiyah said in Tokyo
recently that his country plans to boost its LNG
exports to Japan to more than 11 million tons a
year in 2010 from the current 6 million tons.
"Now we're listening to our customers [in
Japan], we feel they need more LNG. So I think we
can increase another 5 million tons in the coming
years," said Attiyah, who doubles as Qatar's
second deputy premier. "We are very committed to
Japan," he said in an interview with the Kyodo
news agency. "We would like to be a more reliable
energy supplier for Japan."
Attiyah also
said Qatar plans to expand global LNG shipments to
35 million tons a year in 2007 from the current 29
million tons, making it the world's biggest LNG
producer. He projected that Qatar's global LNG
shipments will steadily grow to 77 million tons
per year in 2010.
Along with Japan,
Attiyah said, Qatar plans to increase LNG exports
to South Korea by 2 million tons next year to 7
million tons a year and to India by 2.5 million
tons in 2009 to 7.5 million tons. Qatar will also
start shipping LNG to Taiwan in 2008.
The
comments by the Qatari minister came as a blessing
for Japan, which had suffered a spate of setbacks
in its energy-security strategy in recent months.
This year Japan adopted a "New National
Energy Strategy". The new strategy reflects
growing concerns about energy security in the
medium and long terms amid high oil prices and the
intensifying global rush for oil, gas and other
resources, led by China and India. The new
strategy calls for strengthened relations with
oil- and gas-rich countries through such means as
provision of official development assistance and
conclusion of free-trade agreements to ensure
stable supplies.
The new strategy also
calls for, among other things, increasing the
ratio of "Hinomaru oil" - that developed and
imported by domestic companies - from 15% to 40%
of total imports by 2030. But this 40% target
("Hinomaru", literally "sun disc", refers to
Japan's flag) has become even more difficult to
achieve after Japan's recent agreement to give up
its controlling interest in the $2 billion
development of Iran's massive Azadegan oilfield
amid tensions over Tehran's nuclear program. Inpex
Holdings Inc, Japan's leading energy developer
fully backed by the government, reduced its stake
in the southwestern oilfield from 75% to 10%.
Until recently, there had been growing
expectations in Japan of Russia's Far East, a
region not only rich in oil and gas reserves but
much closer to Japan geographically than the
Middle East, which means lower transportation
costs. But Russia recently put a damper on such
expectations.
In September, the Russian
Natural Resources Ministry froze a key
environmental permit for the Sakhalin-2
development project off the coast of Sakhalin
Island, citing problems with environmental
conservation. The project is operated by an
international consortium, Sakhalin Energy, in
which Royal Dutch Shell PLC has a 55% stake.
Japanese trading firms Mitsui & Co and
Mitsubishi Corp hold shares of 25% and 20%,
respectively.
The Sakhalin-2 project is
expected to turn out 9.6 million tons of LNG a
year from 2008. Japanese companies, including
Tokyo Electric Power Co, Tokyo Gas Co and Chubu
Electric Power Co, have agreed to purchase 4.73
million tons per year - equivalent to 8% of
Japan's LNG imports in fiscal 2005. The initial
impact on Japan of a delay in imports from the
project might be limited. But if there were a
prolonged suspension, the impact could be
far-reaching.
In yet another development
that casts a cloud over the future of Japan's
energy security, Indonesia, Japan's largest LNG
supplier, is poised to cut in half its Japan-bound
exports of gas when long-term contracts expire in
2010 to boost the availability of natural gas for
domestic industries amid decreasing oil and
natural-gas production at home.
Reflecting
the growing importance Japan attaches to Qatar for
its energy security, Tokyo has been barreling
ahead in recent months to strengthen relations
with Doha. For Qatar, Japan is the biggest trading
partner, purchasing about 70% of its oil
production.
In April, Toshihiro Nikai, who
was then the minister of economy, trade and
industry, signed an agreement with his Qatari
counterpart, Attiyah, to boost relations. During
his unusually long nine-day visit to Japan in late
November, Attiyah held talks with Foreign Minister
Taro Aso and the current Minister of Economy,
Trade and Industry Akira Amari during the first
Japan-Qatar Joint Economic Committee, a
ministerial forum aimed at boosting bilateral
economic relations.
At the forum's first
meeting, the two countries reaffirmed the
importance of oil and natural gas in bilateral
economic relations, with Qatar pledging to ensure
stable supplies of such resources to Japan. They
also agreed to set up working groups on energy and
on improvement of the business environment and
investment.
Doha "expressed its view that
Qatar would keep supplying oil and natural gas
including LNG to Japan at an acceptable rate for
both sides in a stable manner", the two countries
said in a joint statement issued after the
meeting. Meanwhile, Tokyo "expressed its view that
the importance of Qatar would increase as a
supplier of oil and natural gas including LNG, and
expressed its intention to take appropriate
measures in an expeditious manner to improve and
expand the transportation of LNG", the statement
said.
In tandem with Tokyo's efforts to
strengthen ties with Qatar, the
government-affiliated Japan Bank for International
Cooperation signed a business-partnership
agreement with Qatar Petroleum recently, aimed at
developing a more favorable environment for
Japanese companies hoping to get involved in
energy resource development projects in Qatar.
Under the agreement, the JBIC will also extend
loans for those projects on condition that
Japanese energy developers are allowed to
participate in the projects.
Meanwhile,
Japan and the six-member Gulf Cooperation Council
launched negotiations on concluding a free-trade
agreement in September. The two sides hope to
conclude the pact by the end of 2007. The GCC
groups Saudi Arabia, the UAE, Bahrain, Oman, Qatar
and Kuwait. Through the planned pact, Tokyo aims
to secure stable energy supplies from the Persian
Gulf region.
Japanese stampede in
Qatar Japanese firms have been closely
involved in Qatar's gas-production increase, and
the pace of this has been accelerating in recent
months.
Two major trading firms, Mitsui
& Co and Marubeni Corp, have stakes in two
main projects of Qatar Liquefied Gas Co Ltd
(Qatargas). Mitsui and Marubeni each have a 2.5%
stake in the Qatargas upstream joint venture
(offshore production and the onshore receiving
facilities). They also have a 7.5% stake each in
the Qatargas downstream joint venture (onshore LNG
plant).
In July, Japan's Chiyoda Corp and
France's Technip SA received a 180 billion yen
(nearly US$1.56 billion) order from ExxonMobil
Corp in Qatar to build what will be the world's
largest gas-processing plant. Chiyoda and Technip
received the order for engineering, procurement
and construction of the Al Khaleej Gas Phase 2
Project, or AKG2.
The plant will have
capacity to produce 12.5 billion standard cubic
feet of gas per day when the project is completed
in 2009. Last December, the Chiyoda-Technip
alliance received a 500 billion yen contract to
construct two LNG production facilities near the
AKG2 plant site.
Also in July, Chiyoda and
another Japanese firm, Toyo Engineering Corp, each
won orders from the Royal Dutch Shell group to
build gas-to-liquid (GTL) fuel-production
facilities in Qatar. The orders combined are
valued at about 370 billion yen. Royal Dutch Shell
is building the facilities at an estimated total
cost of about 1 trillion yen. The plants are
scheduled to produce 140,000 barrels a day,
ranking the operations among the world's largest.
In October, Marubeni signed a contract
with Qatar General Electricity & Water Corp,
or Kahramaa, to build and operate a 2,000-megawatt
power plant on the outskirts of Doha. The $2.3
billion project is one of the biggest in the world
in which the building of new electric power
facilities is carried out by private sector.
Under the contract, Marubeni will hold a
40% stake in a consortium that will build and
operate the plant. Qatar Petroleum will hold 20%,
and Qatar Electricity & Water Co will hold
40%. The consortium will complete the plant by
April 2010.
Four Japanese firms, led by
major Japanese oil refiners Idemitsu Kosan Co and
Cosmo Oil Co, said last Tuesday that they have
agreed to join a new Qatari refinery project,
marking the Japanese industry's first overseas
refinery investment. The project, expected to cost
$800 million, comes as Japan's refiners seek more
business opportunities in the gas-rich Gulf state.
Idemitsu and Cosmo Oil will each take a
10% stake in state-run Qatar Petroleum's Laffan
Refinery, which plans to build a
146,000-barrel-per-day plant. Mitsui and Marubeni
will each take 4.5%, reducing Qatar Petroleum's
holding to 51%. The new refinery is expected to
come on stream in 2008.
Hisane
Masaki is a Tokyo-based journalist,
commentator and scholar on international politics
and economy. Masaki's e-mail address is
yiu45535@nifty.com.
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