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| Japan's Oil Dream |
| [Commentary] Another industry shake-up possible |
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Hisane Masaki (hmasaki)  |
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Published 2007-04-06 06:07 (KST) |
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Japan's Inpex Holdings Inc, established a year ago through the government-engineered merger of Inpex Corp and Teikoku Oil Co, the nation's no. 1 and no. 3 developers respectively, is aggressively expanding its overseas business. 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 percent to 40 percent by 2030.
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FROM THE SECTION |
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| 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 percent 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 percent target for Hinomaru oil. The Japanese government, Inpex Holdings' biggest shareholder with a stake of nearly 30 percent, still believes the holding company is too small to compete with powerful foreign rivals. So what will come next?
Inpex Holdings was created by putting Inpex Corp and Teikoku Oil Co under its umbrella. The holding company has been conceived in effect 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.
The Ministry of Economy, Trade and Industry (METI), Inpex Corp's largest shareholder, with a 36 percent stake, played a key role in the marriage of the two developers, hoping to foster a more powerful entity to compete with foreign rivals. Inpex Corp absorbed another government-affiliated firm, Japan Oil Development, in 2004. Teikoku Oil Co was also originally established by the government. The government now has 29.3 percent of Inpex Holdings.
The government holds sway through the presence of former METI officials in top posts, as well as through its unrivaled equity stake. Chairman Kunihiko Matsuo is a former chief of the METI-affiliated Small and Medium Enterprise Agency, and its president, Naoki Kuroda, is a former head of the also METI-affiliated Natural Resources and Energy Agency. Matsuo and Kuroda still concurrently serve as chairman and president, respectively, of Inpex Corp, the posts they have held since before the establishment of Inpex Holdings.
The new basic energy plan approved last month stipulates that fostering an internationally competitive developer has become a "decisive factor" in ensuring energy security. As things stand now, however, the holding company of Inpex Corp and Teikoku Oil Co is still nowhere close to becoming an oil major that can match US and European giants.
Inpex Holdings currently produces about 400,000 barrels of oil per day. This amount is not only dwarfed by the outputs of any of the five biggest oil majors -- ExxonMobil, BP, Royal Dutch Shell, Total and Chevron -- but pales before even those of the smaller international oil majors. Eni of Italy, for example, produces about 1.7 million barrels of oil per day, an amount more than four times Inpex Holdings.
The Japanese government wants Inpex Holdings to become a much bigger player on the global stage. The shortcut to realizing the dream is further consolidation of government-dominated developers. In fact, the government plans to transfer its 50 percent stake in Sakhalin Oil and Gas Development Co (SODECO) to Inpex Holdings in the future. SODECO, a consortium of the Japanese public and private sectors, is participating in the huge ExxonMobil-led Sakahalin-1 project in Russia's Far East, with a 30 percent stake.
Even the future merger of Inpex Holdings and Japan Petroleum Exploration Co (JAPEX), another major Japanese developer, cannot be ruled out. JAPEX is 49.9 percent owned by the government. JAPEX president and chief executive officer Yuji Tanahashi is a former METI official who rose to the top bureaucratic post of administrative vice minister. Some industry observers believe that the biggest obstacle to the possible merger of the two developers is the personal rivalry between Matsuo and Tanahashi, both of whom joined METI -- which was then called the Ministry of International Trade and Industry -- as career bureaucrats in 1958.
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Hisane Masaki is a Tokyo-based journalist, commentator and scholar on international politics and economy. This is part of an article that originally appeared on Asia Times and also in Global Carbon Emissions Monitor (GCEM), a magazine published by the UK-based NewsBase Ltd.
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©2007 OhmyNews
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