Page 2 of 3 Japan's quest for
Bigger Oil By Hisane Masaki
its much-criticized blunder over
now-defunct Japan National Oil Corp (JNOC). The
government's recent strong backing for domestic
energy companies engaged in foreign exploration
and production of oil and gas marks a clear policy
reversal.
JOGMEC was established in early
2004 as a successor to state-owned JNOC, which was
set up in the 1960s to pioneer Japan's drive to
boost energy security. JNOC was disbanded after
piling
up
an immense amount of debt through loans and
investments - worth a total of about 2 trillion
yen - to help domestic firms participate in many
wasteful exploration projects abroad.
Two
years after JNOC was formally disbanded in April
2005 and amid growing national energy-security
concerns, many Japanese government and industry
people now ask: Was it really necessary to disband
the organization, which played a key role in
securing oil and gas interests for Japanese firms
abroad?
Although JNOC was disbanded after
racking up huge debts, internal government
documents compiled last year show that because of
current high oil prices, the national company now
would have been a highly profitable entity, with
more than 700 billion yen ($6 billion) in latent
profits. JOGMEC inherited some operations of JNOC,
but unlike JNOC, JOGMEC's functions do not include
information gathering and intermediation for
domestic firms. However, there is at least one
thing JOGMEC will do more than JNOC. Even JNOC's
investment in exploration projects being
implemented by domestic firms was limited to 70%
of the total investment.
Meanwhile, JOGMEC
signed a basic cooperation agreement with
Brazilian state-owned oil company Petrobras on
March 20 for the joint exploration and development
of oil and gas fields in Southeast Asia and South
America. Special emphasis will be given to
deepwater projects. JOGMEC and Petrobras agreed to
hold annual meetings to exchange relevant
information and identify international projects of
mutual interest.
The government-affiliated
Japan Bank for International Cooperation (JBIC),
one of the world's biggest international financial
institutions, is also revving up its
energy-related business activities. In the past
year, JBIC has signed comprehensive partnership
agreements with the governments, state-run oil and
gas firms or other related organizations of many
resource-rich countries, including South Africa,
Indonesia, Brazil, Oman, Qatar, Brunei, Uzbekistan
and Kazakhstan, in hopes of ensuring stable
supplies.
On March 26, JBIC also signed a
loan agreement totaling up to $170 million with
Inpex Offshore North Campos Ltd, a joint-venture
firm among Inpex Corp, Sojitz Corp and JOGMEC, to
support its development of the Frade Block off the
shores of Campos, Brazil, in cooperation with
Chevron Corp and Petrobras. The loan is
co-financed with three of the biggest Japanese
banks - Mizuho Corporate Bank, the Bank of
Tokyo-Mitsubishi UFJ, and Sumitomo Mitsui Banking
Corp.
"This is the first oil-development
project in which a Japanese firm has a concession
right in Brazil and crude-oil production is
realized," JBIC said in a statement. "The project
will thus contribute, as an independent
development project, to the securing and stable
supply of energy resources to Japan."
Investment spree Inpex Holdings
has been barreling ahead, except for a hitch in
Iran, where it lost its controlling interest in
the $2 billion development of the massive Azadegan
oilfield last autumn amid international tensions
over Tehran's nuclear program.
Inpex
Holdings reduced its stake in the oilfield from
75% to 10%. Officially, Inpex Holdings maintained
that the deal went awry because of insufficient
efforts by Tehran to de-mine the project area on
the border with Iraq, but the firm was widely
believed to have reduced its stake in the oil
project in the face of formidable US pressure on
Japan.
Inpex Holdings has been
aggressively expanding its overseas business in
the past year, acquiring new interests and
starting production at its existing fields.
Last June, an international consortium
that includes Inpex Holdings, Chevron Corp and
others decided to invest up to $2.4 billion to
begin commercial production of crude oil in a
field in Brazil's Frade Block. Production is
expected to begin in April 2009 with a daily
output of 100,000 barrels. The field has about 300
million barrels of recoverable crude.
The
Baku-Tbilisi-Ceyhan (BTC) pipeline linking
Azerbaijan to Turkey began shipments from a
Turkish port last June. The multibillion-dollar
pipeline was constructed by an international
consortium including Inpex Holdings and another
Japanese firm, Itochu Corp. Inpex Holdings and
Itochu have stakes in the BP-operated
Azeri-Chirag-Gunashli (ACG) field in the South
Caspian area of Azerbaijan, of 10% and 3.92%
respectively.
Meanwhile, a group of
companies running Kazakhstan's massive Kashagan
oilfield is conducting a feasibility study into a
$4 billion transportation system that would take
the field's oil to the BTC pipeline. In addition
to operator Eni SpA, the consortium developing the
field includes ExxonMobil Corp, Royal Dutch Shell
PLC, Total SA, ConocoPhillips, Inpex Holdings and
KazMunaiGaz. Eni, ExxonMobil, Royal Dutch Shell
and Total have larger shares than the other
partners, each with 18.52%. Inpex Holdings has an
8.33% interest in the Kashagan oilfield.
With proven reserves of more than 13
billion barrels, Kashagan is considered to be the
largest discovery in 30 years. Oil output at
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