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     Dec 19, 2006
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Japan banks on energy, environment
By Hisane Masaki

TOKYO - The government-affiliated Japan Bank for International Cooperation (JBIC), one of the world's biggest international financial institutions, is revving up its energy- and environment-related business activities, apparently reflecting growing government concerns over energy supplies and global warming.

Resource-poor Japan is pumping no small public financial support into its drive for oil, gas and other energy resources abroad, in a

desperate bid to ensure national energy security amid stubbornly high oil prices and also in response to the intensifying global rush for resources, led by China and India.

The public financial support takes the form of investment, loans and loan-guarantee and investment insurance. It is provided mainly through government-affiliated financial institutions, including JBIC.

Ensuring stable oil supplies is a matter of life or death for the world's second-largest economy. Japan imports almost all of its oil, nearly 90% of which comes from the volatile Middle East. Japan also buys almost all of its natural gas from abroad, making it the world's largest importer of liquefied natural gas (LNG).

Meanwhile, JBIC is rushing to sign partnership agreements with many developing countries on the so-called Clean Development Mechanism (CDM) projects. In recent months alone, JBIC has signed such agreements with many countries, including Singapore, El Salvador, Sri Lanka, Malaysia, Thailand, Indonesia, India and Brazil.

The CDM partnership agreements are aimed at helping Japanese firms participate in CDM projects and thereby acquire emission rights for greenhouse gases such as carbon dioxide. CDM is a key mechanism designed to help industrialized countries achieve their greenhouse-gas reduction targets under the Kyoto Protocol on curbing global warming.

JBIC is among the world's largest international financial institutions. Its outstanding loan and other financing total 19.5 trillion yen (nearly US$170 billion) and its outstanding guarantees total a little over a trillion yen.

Energy security concerns
Highly alarmed by stubbornly high global oil prices and the red-hot global rush for energy resources, led by China and India, Japan released in late May a new strategy aimed at ensuring stable energy-resource supplies in the long term.

The new national energy strategy calls for, among other things, strengthening relations with resource-rich countries through such measures as official development assistance (ODA) and free-trade agreements. It also calls for securing energy resources abroad through the fostering of more powerful domestic energy companies with the ultimate goal of boosting the ratio of "Hinomaru oil", or oil developed and imported through domestic producers, from the current 15% to 40% by 2030. Hinomaru is Japan's national Rising Sun flag.

To achieve the numerical target for "Hinomaru oil", the new national energy strategy stresses the importance of "drastically strengthening the supply of risk money" related to the exploration and development of overseas oil and natural-gas reserves by domestic development companies. In this connection, the document specifically emphasizes the need for Japan Oil, Natural Gas and Metals Corp and other government-affiliated organizations to play the role of an effective risk-money supplier.

But Japan has suffered a spate of setbacks in its energy-security strategy recently.

In September, Japan gave up its controlling interest in the $2 billion development of Iran's massive Azadegan oilfield amid tensions over Tehran's nuclear program. Indonesia, Japan's current No 1 supplier of LNG, is considering cutting in half shipments to the country from 2010 - when long-term contracts expire - to boost the availability of natural gas for domestic industries amid decreasing oil and natural-gas production at home. At the same time, Japan and Russia remain at odds over the Sakhalin-2 oil and gas project in Russia's Far East.

Comprehensive partnership agreements
Since the current fiscal year began in April, JBIC has so far signed comprehensive partnership agreements with South Africa, Indonesia, Brazil, Oman, Qatar, Brunei, Uzbekistan and Kazakhstan in the hopes of ensuring stable supplies.

South Africa is rich in resources such as gold, platinum and diamonds. Indonesia is the biggest supplier of LNG to Japan, accounting for 25% of the 58 million tons Japan purchased from abroad in 2005. Brazil is a promising supplier of ethanol. Oman and Qatar are members of the six-nation Gulf Cooperation Council, which also includes Saudi Arabia, the United Arab Emirates, Bahrain and Kuwait. The GCC accounts for more than 70% of Japanese crude-oil imports. Brunei is also an oil and gas producer.

Uzbekistan and Kazakhstan are rich in resources, especially uranium, as well as oil and gas.

"JBIC is making efforts to strengthen relations with the governments of oil- and gas-producing countries, as well as state-owned oil and gas companies, which play a crucial role as a supply source of energy resources for Japan," JBIC said. "JBIC is

Continued 1 2 3 4 

Japan joins the energy race (Jul 28, '06)


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