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3 Japan's quest for Bigger
Oil By Hisane Masaki
TOKYO - Japan's Inpex Holdings Inc marks
one year on Tuesday since it was established
through the government-engineered merger of Inpex
Corp and Teikoku Oil Co, the nation's No 1 and No
3 developers respectively.
Reflecting the
government's strong desire to see Japan's largest
oil and natural-gas developer become even more
powerful than rival international oil majors,
Inpex Holdings, founded on April 3, 2006, as a
holding company of the two developers, has been
aggressively expanding its
overseas business in the past year. Its chairman
said recently that it will spend more than 200
billion yen (US$1.7 billion) annually to explore
and develop oil and gas fields over the next three
to four years.
Increasingly concerned
about its medium- and long-term energy security
amid stubbornly high prices - and intensifying
global competition - for oil and gas,
resource-poor Japan has set an ambitious goal of
boosting the ratio of "Hinomaru oil", or oil
developed and imported through domestic producers,
from the current 15% to 40% by 2030.
To
achieve that goal, the government has begun to
pump no small amount of public funds into
private-sector efforts to secure oil, gas and
other interests abroad. Two significant public
financial measures - a new type of trade and
investment insurance scheme and increased
investment in private-sector projects - are
available from the current fiscal year, which
started on April 1.
Ensuring stability of
supply is a matter of life or death for the
world's second-largest economy. Japan imports
virtually all of its oil, with nearly 90% of that
coming from the volatile Middle East. It also buys
almost all of its natural gas from abroad, making
it the world's largest importer of liquefied
natural gas (LNG).
However, whether Japan
will be able to have a powerful developer to rival
international oil majors is widely seen as holding
the key to achieving the 40% target for Hinomaru
oil. The Japanese government, Inpex Holdings'
biggest shareholder with a stake of nearly 30%,
still believes the holding company is too small to
compete with powerful foreign rivals. So what will
come next?
More public funds Highly alarmed by high oil prices and the
red-hot global rush for energy resources led by
China and India, Japan's Ministry of Economy,
Trade and Industry (METI) adopted last May a new
strategy aimed at ensuring stable energy-resource
supplies in the medium and long terms.
The
New National Energy Strategy calls for, among
other things, securing energy resources abroad
through the fostering of more powerful domestic
energy companies, with the ultimate goal of
boosting the ratio of Hinomaru oil to 40% by 2030.
It also calls for strengthening relations with
resource-rich countries through such measures as
official development assistance and free-trade
agreements.
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,
Gas and Metals National Corp (JOGMEC) and other
government-affiliated organizations to play the
role of an effective risk-money supplier.
In line with the METI-adopted strategy,
Prime Minister Shinzo Abe's cabinet approved a new
basic energy plan early last month as a guideline
for energy-policy implementation over the next
decade. The new plan, which replaced the old one
approved in 2003, calls for, among other things,
greater government involvement in efforts to
secure energy interests abroad and the promotion
of nuclear power generation.
On Sunday,
the government-affiliated Nippon Export and
Investment Insurance (NEXI) began to accept
applications for a new type of trade and
investment insurance scheme to cover possible
losses incurred in overseas energy-development
projects by Japanese corporations due to natural
disasters, accidents and political or terrorist
acts.
The new product will be offered with
much lower premiums - up to 75% lower - than
ordinary trade and investment insurance to
encourage the nation's private firms to undertake
energy developments overseas and help them survive
in the tough global competition for oil, natural
gas and other energy-resource interests.
The government will act as the reinsurer
for the new product, dubbed "comprehensive natural
resources and energy insurance". With its
involvement in the new program, the government
hopes to protect domestic companies from being
unilaterally stripped of their interests by host
countries. The combined maximum amount of
undertakings has been set at 300 billion yen.
Meanwhile, JOGMEC, another
government-affiliated body, will raise, from the
current fiscal year, its investment in promising
exploration projects being implemented by domestic
firms abroad to a maximum of 75% of the total
investment amount from the previous 50%. Like
NEXI's new trade and investment insurance scheme,
JOGMEC's greater investment is designed to
encourage often risk-averse domestic firms to
venture into high-risk projects abroad.
Until last year, the government had shied
away from getting deeply involved in risky
exploration projects abroad, in the wake of
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