IEEJ: November 2009

Northeast Asia Petroleum Forum 2009

“Alliance Strategy for
Upstream Industries inNortheast Asia”

Arabian Oil Company, LtdOct.27,2009
Taro ShojiIEEJ: November 2009

Contents
1.

Japanese government’s policy for petroleum
upstream industries.

2.

Chinese state-run oil companies’ strategy for
upstream business.

3.

Korea National Oil Corporation’ expanding strategy.

4.

New trend of upstream strategy by northeastern
upstream companies and state-run corporations.

5.

Seeking alliance strategy for Japanese, Korean,Chinese upstream companies and corporations.
1IEEJ: November 2009

1. Japanese Government’s Policy for
Petroleum Upstream Industries(1).
a. JOGMEC’s equity finance for exploration by Japanese
private companies in the overseas’ projects.
b. JBIC’s finance and JOGMEC’s liability guarantee fordevelopment by Japanese private companies in theoverseas’ projects.
c. JBIC’s finance and JOGMEC’s liability guarantee foracquisition by Japanese private companies in the overseas’
projects.
d. Deployment of diplomatic policy for resource’s seeking
against resource-rich countries.
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1. Japanese Government’s Policy for
Petroleum Upstream Industries(2).
e.

f.
g.
h.
i.

Economical and environmental cooperation such as
improvement of social infrastructure, providing
environmental technology and aid of peripherals aroundresource-rich countries.
Prioritizing operation- right on the overseas hydrocarbon
development projects.
Prioritizing to secure the stable and safety supplier bydiversifying from the Middle East area.
Prioritizing the big projects of LNG development.
Integrating several upstream companies into big -sized
upstream companies to compete with foreign major and state
corporations.
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Financial Support
ExplorationDevelopmentJapanese Government

Private companies

Equity capital
Liability guarantee
up to 75%

JOGMEC
Equitycapital

Equity capital
up to 75%

Equity capital for
asset acquisition up to50%

JBIC
Loans

Project companies
Project companies

Loans
Equity capital(Source : JOGMEC)

Private companies

N.B. JNOC was transformed to JOGMEC as of Feb 29, 2004.

Private banks
Liability guarantee
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IEEJ: November 2009

Exploration
Providing up to 75% of the risk capital through equity to theproject companies for oil and gas exploration activities overseas
and offshore Japan.

Development
Granting loan guarantees of up to 75% of development capitalfinanced by banks to the project companies.
Providing up to 50% of the risk capital through equity to theproject companies for asset acquisitions.
(Source: JOGMEC)
NB: JOGMEC is “Japan Oil, Gas and Metals NationalCorporation ”
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IEEJ: November 2009

Latest new major projects for natural
gas by Japanese firms
Latest new major projects for natural gas by the Japanese firms as follows:
Tiga project (Malaysia)
Oman Project (Oman)
Tangguh project (Indonesia)
Masera project (Indonesia)
Australia NWS project (Australia)
Darwin LNG Project (Australia)
Ichthys LNG Project (Australia)
Qatar Gas Project (Qatar)
Sakhalin Ⅰproject (Russia)
Sakhalin Ⅱproject (Russia)

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IEEJ: November 2009

2.Chinese State-run Oil Companies’
strategy for upstream business(1).
a. State mission for securing aggressively stable overseas
suppliers against expanding domestic demands of oil and gas
products in middle and long terms period.
b. Deployment of frequent diplomatic visits for resources’
seeking by top state officials.
c. Strengthening domestic and overseas development capacity
for oil and gas by reinforcing the 3 major state oil companies.
d. Enlarging the operator’s capacity and development technology
by collecting the capital through 3 major state companies’
listing on the stock exchange.
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IEEJ: November 2009

2.Chinese State-run Oil Companies’
strategy for upstream business(2).
e.

f.

g.
h.

Supporting advancement of overseas projects driven by 3
major state oil companies by utilizing accumulated richdollars through 3 state financial banks like ChinaDevelopment Bank.
Optimizing the procuring measures by selecting tanker’sand/or pipelines’ supply for bringing oil and gas fromoverseas.
Advancing the purchase of the oil and gas production
projects as well as “loan for oil scheme”.
Participating into the big oil and gas projects by making
alliance with Majors and other state oil companies.

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2.Chinese State-run Oil Companies’ strategy
for upstream business(3).
Chinese Oil and Gas Acquisitions 2009
Firm

Target

Focus

CNPC
CNPC
PetroChina

Verenex Energy
Mangistaumunaigaz,50%Singapore Petroleum Co.

Sinopec

Addax Petroleum

CNOOC,Sinopec
Sinochem

Angola Block 32,20%
Emerald Energy
MacKay River,Dover oil sands
projects,60%

Libya
Kazakhstan
Singapore
Nigeria,Cameroon,Gabon,Iraq
AngolaSyria,Colombia
CanadaPetroChina
Total

2P Value Transaction Value
2.73+
2.5
NA$398
1,400
1,000

13.3

8,812

4.76
13.43

1,300805

0.55*

1,700
$15,415

Source:HIS Herold +Contingent & prospective *Contingent
Reserves values in $/boe. Transaction values in million US$
PIW Sep.7,2009 issued

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Chinese Government’s supporting items for overseas
upstream projects
Finance :China Development Bank and etc.
(Interest supply, applying preferential interest rate)

Diplomacy: Improvement of investment environment
Agreements between the governments(Protection on investments, Prevention for double taxation, Cooperation of judiciary)

Providing and sharing information(Assignment of the energy -attche at the important oil producing countries)

Deregulation: Simplifying the approval procedures(In case of overseas investment & establishing overseas companies)

Demolishing limitation of procuring foreign currency on investing
to overseas.
Sources: JOGMEC
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IEEJ: November 2009

3. Korea National Oil Corporation’
expanding strategy(1)a.

KNOC announced its expanding plan to the effect that the production ofoil and gas should be 6 times and its reservoirs be 5 times by 2012.

b.

Governmental KNOC to be expanded and private downstream based
companies are jointly devoting themselves to the overseas upstream
projects.

c.

Recently Korean companies push into overseas upstream business by theway of “package style” which is to secure resources while supporting
energy infrastructure and social overhead capital.

d.

It seems to be concentrating for purchasing the production projects andentities rather than finding the exploration projects.

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3. Korea National Oil Corporation’expanding strategy(2)e. Choosing the core area such as Russia, Central Asia, Africa
and South America and promoting the seeking resources’
diplomacy by top state officials.
f. Planning to increase the financial support amount by thegovernment to be used for the buying the exploration area
and right .
g. Establishing the policy of securing competent petroleum
engineers for the sake of filling the shortage.
(NB: The above contents refer to Ms. Kim’s paper which is published in theIEEJ’s Aug. edition of 2009.)
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IEEJ: November 2009

4.

a.

b.

c.

New trend of Upstream Strategy by
Northeastern upstream companies andstate-run corporations.
China is on strong position for securing overseas hydrocarbon resources
backed by future tough demands and firm state mission.
Japanese upstream companies activity is still supported by thegovernment due to the necessity of enforcing the stable supply sources
by Japanese companies, nevertheless the sudden and gradual decrease ofoil products demands will be occurred. Natural gas has still highdemands by CO2 low emission.
Korea is importing almost oil from the overseas and also exporting muchvolume of oil products as an important exporting goods as comparedwith other northeast neighboring countries. For the sake of fulfilling thecrude oil demand, Korea has established the self-development policy bytheir own companies and KNOC for the overseas hydrocarbon resources.
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5.

a.

b.

c.

Seeking Alliance Strategy for Japanese,Korean, Chinese upstream companiesand corporations(1)Northeast Asian 3 countries leading by China should be continuing tocontribute world wide stable supply of hydrocarbon resources not only
for the sake of own demands but also world ones through own
exploration, development and production projects.
The 3 countries are active players in the upstream business and weconfirm that China has a big and emerging hydrocarbon market atpresent as well as in future which will consume all supply volume bythem, and that Korea must import and/or bring it by their own entities
from overseas for their domestic demands and exporting products, andthat Japan has still quite a big market for hydrocarbon resources and astrategy for strengthening own upstream industries for contributing to theworld hydrocarbon suppliability.
Northeast Asia is the biggest consumer and located at the nearest place toRussia and Middle East where most of oil and gas resources are and will
be existing.
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5. Seeking Alliance Strategy for Japanese,
Korean, Chinese upstream companies
and corporations(2)d.

e.

Considering that financing and operator ability is good at
China, environmental technology and operation ability areheld by Japan, performing strategic package with upstream
projects and ability of exporting oil products are well handled
by Korea, 3 of us should understand the necessity of alliancefor promoting the upstream business in the word wide area.
Cooperation for financing to the big projects, exchange ofpetroleum related technology, sharing opportunities oftraining and education for the young engineers, reciprocal
exchange of equity oil and gas and etc, should be seemed to be
counted as cooperative items for several occasional businesschances among the 3 countries’ business entities.
Contact : report@tky.ieej.or.jp

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