Japan a bigger player on global oil stage

The formation of a new Japanese oil company, Inpex Holdings, was announced on Monday. The result of a government-orchestrated merger between Inpex Corp and Teikoku Oil, the new firm appears to have been conceived as a “national policy corporation” designed to secure supplies for Japan from abroad. The government believes that the combined firm’s greater size will better serve this purpose.

But strong government backing could be a double-edged sword for Inpex, because national policy does not always serve the interests of an individual private company, and there is a possibility that the government’s politically motivated wishes will outweigh profit-and-loss considerations. The key tests may come first in the East China Sea, where the company has a concession to start drilling in an area that is at the center of a simmering gas dispute with China, and later Iran, where it has a 75% interest in the huge Azadegan oil project.

..In early 2004, Japan and Iran signed a $3 billion deal to develop Iran’s massive Azadegan oilfield. The project is expected to pump 700,000 barrels of oil per day by 2010. But with international tensions rising over Iran’s nuclear program, there are growing concerns in Japan about how the crisis will play out. Many analysts point out that should Japan be forced to give up the Azadegan project as part of international sanctions against Tehran, China, which recently won rights to the Yadavaran oilfield in Iran, could step in to replace Japan.

Japan’s oil diplomacy suffered a serious setback when Arabian Oil Co, which has strong backing of the government, lost its right to operate the Khafji oilfield in the Persian Gulf – in the Saudi-controlled portion of the field in early 2000 and the Kuwaiti-controlled portion in early 2003. But Japan has since regained lost ground, securing oilfields elsewhere in the Middle East.

After the Azadegan oil deal, Japan scored another coup in its oil diplomacy. Five Japanese enterprises won international tenders to acquire the rights to develop six oilfields in Libya. The deals involving Nippon Oil, Mitsubishi, Japan Petroleum Exploration, Teikoku Oil and Inpex mark the first oil-exploration concessions granted to Japanese firms in Libya. Inpex joined hands with the major French oil firm Total in the bid. The oil projects are likely to be the biggest involving Japanese companies since a group acquired the concessions for the Sakhalin project in Russia. The Libyan fields are estimated to have the eighth-richest reserves in the world.

Asia Times