GraSPP-DP-E-08-002 and SEPP-DP-E-08-002

Japanʼ s Overseas Oil Development anda Role of Technology

Masanari Koike
May 2008

GraSPP Discussion Paper E-08-002

SEPP Discussion Paper E-08-002

GraSPP-DP-E-08-002 and SEPP-DP-E-08-002

Japan’s Overseas Oil Development anda Role of Technology

Masanari Koike

May 2008

Ph.D. Candidate
Department of Technology Management for Innovation
Graduate School of Engineering,
The University of Tokyo
7-3-1, Hongo, Bunkyo,
Tokyo 113-8656 JAPANE-mail: masanarikoike@nifty.com
注：

著者の所属、連絡先はいずれも執筆当時のものです。
本稿に関するお問い合わせは、東京大学公共政策大学院寄付講座「エネルギー・地球環
境の持続性確保と公共政策」（略称 SEPP）（〒113-0033 東京都文京区本郷 7-3-1 035841-1324 sepp@pp.u-tokyo.ac.jp）までお願いします。

SEPP working paper
Japan’s overseas oil development and a role of technology
Masanari Koike
The University of Tokyo(This paper is based on Koike et al. (Energy Policy, 2008).)

Introduction
Japan, both as a resource-poor country and as the world’s third biggest oil consumer(British Petroleum, 2007), has depended on imported oil for almost 100% of its domestic
demand (99.6% in 2006). In its modern history the Japanese economy and foreign policy
have always been constrained by the security issues posed by oil supply. The outbreak of
the Pacific War (1941–1945) and the subsequent defeat, and the first negative growthsince the end of the War after high-flying growth (1974) were caused by a disruption ofoil supply either directly or indirectly. These bitter episodes are firmly established in
the mind of the Japanese nation.
As an alternative to colonizing oil producing countries to reduce its vulnerability of highdependence on foreign producers, Japan has long made efforts after the War to increase
its self-developed oil production in overseas oil fields. Self-developed oil productionmeans that Japan is directly involved in production and operation projects and takes
risks on it. As a result, it is expected to contribute toward the long-term supply stability,
timely prediction of changes in the market, understanding of global trends of
exploration and development, and a wide-ranging and interdependent relationship with
oil-producing countries. Also recently, reflecting a major structural change in theinternational energy market, the Japanese government announced the New National
Energy Strategy of 2006 with a new numerical target of 40% of total oil import securedby the self-development.
This paper tries to indentify how Japan has struggled to achieve its national targets insecuring overseas oil reserves and to what extent the development of technology meetsthe policy planners’ expectations. It is widely understood that the expansion of financial
support by the government is limited in Japan and cannot be a panacea in the current

harsh competitions with national companies of growing oil countries such as China andIndia. Then the effective use of Japan’s competence, especially its technology cameunder review among experts. In the following chapters the paper first describes Japan’s
past efforts from both industrial and policy perspectives in chronological order, thenfocuses on identification of variables influencing Japan’s overseas oil development, andfinally evaluates the potential of technology to achieve its target or any obstacles to its
development.

1. The brief history of Japan’s overseas development
Japan’s overseas oil development was initiated at the end of the 1910s when declining
domestic production made it difficult to meet growing domestic demand mainly for
military use. In addition to the development of North Sakhalin, Japan forged ahead inSouth East Asia to seek for oil supplies, in response to the breakdown of negotiations
with the US and Netherlands over crude oil supply from the Dutch East Indies. Teikoku(Imperial) Resource Development, which had a 98% share of the domestic oil production,
played the key role in this process. Teikoku was founded in 1940 as a private corporate
venture, and later (in 1941), became Teikoku Oil Corporation, which was co-funded byprivate companies and the state government. At the end of the War, with the dissolutionof North Sakhalin Oil, Teikoku was able to survive but lost almost all of its overseas
assets and facilities. After the War, as a result of policies from General Headquarters of
the Allied Forces (GHQ), the Japanese oil industry was clearly divided into two streams;
the upstream industry consisted of one company which exclusively involved in oil
production in domestic fields; and the downstream industry consisted of several
companies which were highly depended on foreign partners for its oil supply.
The post-war overseas oil development started in 1965 when the amendment of the oil
development law allowed Japan Petroleum Exploration (JAPEX) to explore foreign
reserves. Japan’s oil dependency expressed as a percentage of total energy use increased
rapidly from 22.6% in 1956 to 58.2% in 1965. Most of Japan’s growing oil demand wasmet by imports from the Middle East, which accounted for 90.4% of total imports(Kazuo Hoshino, 1968). In order to reduce the dependencies on imports and the Middle
East for oil resources, Japan Petroleum Development Corporation (which changed its
name to Japan National Oil Corporation in 1978 by adding the operation of oilstockpiles to its activities) was established as the national supporting organization forprivate companies. Through the corporation, the Japanese government decided to pushoverseas activities by private companies, targeting 881 million barrels to be imported bydomestic companies approximately one-third of total domestic oil consumption
prospected in 1985.
These aspects of governmental support rapidly increased the volume of overseas
projects. During the first 20 years, after the establishment of the Japan Petroleum
Development Corporation, 119 projects were accepted by JNOC for support.
Unfortunately, most of them ended up with a large amount of debt. In addition to thefinancial consequences, Japan’s mixed effort, involving both the government and theprivate sector, failed to achieve any of the original targets of increasing the ratio ofself-developed oil in terms of total imports and diversification of the source countries foroil imports from the Middle East (Table 1).
Table 1. JNOC’s financial support and crude oil import in Japan(Million Yen)
1970

1980

1990

2000

2003

EquityCumulative total
Cumulative loss
Cumulative exchange loss

28,073－－

241,420
37,444
65

596,669
126,811
116

999,521451,064
117

1,195,123
810,662
117

Loan
Cumulative total
Cumulative loss
Cumulative exchange loss

4,629
－
－

268,587－565

857,239
69,952
4,258

1,105,138
380,689
17,7491,133,052
439,421
17,892

Guarantee
Cumulative total
Cumulative payment under guarante

11,228－328,489－

891,002
11,454

1,157,365
50,165

1,372,457
63,146

Import dependence (%)

99.5
84.6

99.8
71.4

99.7
71.5

99.7
87.1

99.7
88.5

Japanese-developed oil in total import (%)

9.8

8.9

11.0

13.2

10.8

JNOC's financial contribution

From Middle East

Sources : JNOC, Japan Petroleum Development Association, and METI

The period after 1998 can be seen as the time in which the role of the national
government was publicly reconsidered. In November 1998, a former minister of METI,
Mitsuo Horiuchi, accused JNOC of the ineffective management of tax money byreviewing a number of financial statements opposing government officials’ explanations

that the JNOC remained in surplus. Bowing to public anger, JNOC was dismantled in
2002 as part of the structural reform carried out by the administration of the prime
minister at the time, Junichiro Koizumi. As well as these efforts, the Japanese
government withdrew the new numerical target of overseas oil development in 2000 as
it promoted ineffective management.
The roles of the JNOC were taken over by a new organization, Japan Oil, Gas andMetals National Corporation (JOGMEC). JOGMEC was established to perform threemain roles in supporting private companies: financial support, research anddevelopment for technology, and oil stockpiling. This time, JOGMEC’s financial support
covered not only projects in unexplored areas but also acquisition of existing fields. Yet,the extent of JOGMEC financial contributions is narrowed and scaled down toinvestment and guarantee in relation to borrowing up to 50% of the total exploration
costs. In terms of its legal form, JOGMEC did not become a special public corporation as
JNOC but was established as an incorporated administrative agency that did not enjoy
the privilege of government guarantee for fundraising or exemption from tax liability.
At this point, there was little voice asking for a stronger national commitment by taking
more direct risks, in the debate over reviewing the role of the government in overseas oil
development.

3. Reconsideration of Japan’s past overseas oil development
The history of the Japanese government and oil industry with respect to overseas oil
development provides some clues to the cause and effect of the present situation. Threeintricately combined components can be put forward, based on the chronologicalresearch, and these will be verified by referring to quantitative data or specific policies.
First, the ineffective institutional design of government support was responsible forcausing confusion related to responsibilities and moral hazards in the projects, which
resulted in extremely vulnerable project management. Second, the scope of Japan’s
overseas oil development was restricted by its position in the international politicalscenario and the government’s policy of preferentially exploring undiscovered fields,
which resulted in sticking to poor-potential area with regard to the distribution of theoil reserves. Finally, Japan’s government-industry collaboration ceased due to drasticchanges in the international exchange market, import oil price, and the corollary publicmood placing a greater emphasis on economic efficiency rather than supply security.

These will be investigated in order in the subsequent parts of this section.
3.1 Nontransparent cooperative structure
In terms of the cooperative structure between the Japanese government and privatecompanies, there were mixed outcomes toward the target of increasing overseas projects.
Based on its merits, the involvement of JNOC attracted private money for exploration
projects, which had been too risky for private investment. The reason for this was not
only because exploration and development are not always successful, but also because
the projects do not bring any profit at least for several years until the start of production.
After the establishment of JNOC, the total amount of private money invested in
exploration projects rapidly increased from 5,122 million yen in 1967 to 226,853 million
yen in 1982 (JNOC, 1987).
On the other hand, this system of risk sharing between JNOC and private investors was
detrimental to the original interior features. The system was called a “one-project,
one-company structure” in which a project company was established for each project. In
addition, the project companies were usually founded with the majority shares from
JNOC and the rest from several, or sometimes, a few dozen private companies. As an
example of risk sharing, Japan China Oil Development (JCOD) was established in 1980
for the purpose of an oil development project in the Bo-hai Sea, China. It received 64.5%of the investment funds from JNOC and the rest from 47 other companies. Usually, as amajor shareholder of the projects, JNOC was originally intended to play a passive andsupportive role for promoting independence of private companies. Yet, privatecompanies, enjoying a large amount of risk-free investment and loans from JNOC,
eschewed taking not only exploration risks but also management responsibilities of the
projects. This type of risk-sharing structure inherently involved the nature of obscuring
responsibility for the projects, thus creating a moral hazard.
Questions still remain as to why questionable structures could survive even withdisappointing performance. One of the main reasons came from the fact that the systemof “one-project, one-company” was developed as a product of the mutual interest of theprivate and government sectors with their high incentives to secure the system. On theprivate side, the project companies benefited not only from lowering the risk ofinvestment but also from separating the project accounts from the parent companies’
financial statements. The oil companies were reluctant to consolidate project accounts
because they were usually in the red at least for several years until the production

began, irrespective of whether it succeeded. In addition, in many cases, even after thestart of production, project companies remained in red since the parent companies
purchased the produced oil from project companies at the international market pricewhile imposing large deficits on subsidiaries (Horiuchi interview, 1999a and 1999b). An
old Japanese accounting system supported their interests by investing little faith in the
consolidated accounting, which then rendered the relationship between parent andaffiliated companies unclear. It was not until the year ended March 31, 2001 that allcompanies were required to consolidate all significant investees which were controlled
through substantial ownership of majority voting rights or existence of certain
conditions. In addition, separation of the project accounts from the parent ones wasbeneficial for private companies, since companies could then limit liabilities andprevent creditors from laying claim to their properties retroactively.
On the government side, the departments secured administrative control for industries
and pleasant new posts for the retired officials. By the end of 1997, 15 project companies
were chaired by retired or former MITI officials. These ex-government officials often
migrated to other project companies, and received retirement bonuses on each move. A
former administrative vice minister of MITI served as the president of more than ten
project companies. Although all these companies became bankrupt later, he was neveraccused of mismanagement (Horiuchi, 1998).

These examples were the tip of theiceberg, and the organizational form of JNOC left or even increased the moral hazard of
project management rather than monitoring the extravagant expenditure of tax money.
The accounts of the Japanese central government consist of general and special
accounts, and the JNOC was funded by the latter. Special accounts are intended forcarrying out specific projects, managing specific funds, and other purposes (MOF, 2006).
On this topic, many issues have been raised, including the fact that the establishment ofmany special accounts made monitoring difficult, or that a lot of make-work projects
were carried out to meet the built-in account budget (MOF, 2007). Masajyuro Shiokawa,a former minister of finance, also expressed concern that a substantial amount of tax
money was being ineffectively spent in special accounts while savings accumulated in
the general account (at the Financial Committee of the House of Representatives,
February 25, 2003). In the 2007 appropriation, the net budget of the special account was
175 trillion yen, while that of general accounts was 34 trillion yen. Since the special
accounts were under the administration of ministries and each of them held earmarked
revenue sources, the wasteful expenditure was left unchecked. This is also because anumber of retired officials descended into recipient companies founded by special

accounts and maintained close relationships with supervisory authorities. The case of
JNOC was no exception. JNOC was under MITI’s administration and maintained aclose relationship through the involvement of former MITI officials (Matsumura, 2003).
In addition, the management of JNOC was guaranteed by abundant revenue fromgasoline tax and tariffs on petroleum products. Moreover, as a special public corporation,
JNOC enjoyed the privilege of government guarantee for fund-raising and exemption
from tax liabilities such as corporate income tax or fixed asset tax.

3.2 Limited accessible region
By the beginning of the 1960s, when Japan ventured into the overseas fields again for
the first time since the end of the World War II, the concessions in the majoroil-producing countries, not to mention US and European territories, were alreadydominated by international oil majors. According to an investigation by the Ministry ofInternational Trade and Industry (MITI, reorganized as METI in 2001) on who owned
the concessions area of 17.8 million km2 of the world oil concession area surveyed in
1968–1970, 75% of the world oil concession area was held by U.S. or British companies,
18% by French CFP and ERAP, and 3.3% by Italian ENI. Japan held only 1.9% (MITI,
1971). The Japanese concession area consisted of AOC and NOSODECO. The area of
AOC’s concession in Middle East including Khafji field was small (3,400 km2) but
exceptionally profitable either before or after in the history of Japan’s oil industry,
producing almost all of Japan’s self-developed oil production at that time. AOC won the
Khafji contract by breaking the international standard of 50-50 basis profit sharing
with oil producing countries. The ratios of profit sharing for AOC’s Khafji contract are
44–56 between AOC and Saudi Arabia and 43–57 between AOC and Kuwait (Suzuki,1981). It was a desperate measure of an undeveloped Japanese oil company and AOC
was exposed to harsh international criticism.
Later, resource control intensified in the Middle East, starting with oil reserve
nationalization by Iran in 1951. The field condemnation of Iraq occurred in 1960,
followed by the formation of OPEC by the major oil-producing countries in the same
year. Thus, global exploration and production (E&P) companies were forced to shift
their target fields from the oil-rich regions and areas in which operations werestraightforward from a geological viewpoint to untapped regions and environmentallysevere areas. The undeveloped Japanese E&P industry lagged far behind in the face ofintensifying global competition.

In addition to the external environment at that time, there were some other political or
economic constraints on Japan, which narrowed the scope to advance into the global
E&P competition. In terms of transportation cost, import from Africa and Latin America
was not feasible because of the long distance to Japan and the limited passage capacityof Panama Canal preventing the scale merit. In addition, during the Cold War, alongwith other members of the Free World, Japan had little access to Communist but
resource-rich countries such as the Soviet Union and Central Asian countries. As aresult, relatively open but not so favorable areas in Asia Pacific remained accessible to
Japanese oil companies. The Asia Pacific region remained low and even gradually
declined in the share of the world’s total oil discovery (sum of cumulative production
and proven reserves) from 3.5 % in 1960 to 3.2% in 2000 (calculated by Oil & Gas
Journal and World Oil).
Why did the Japanese stick to unexplored areas? Would it have been equally valuablefor them to get into the existing fields by acquiring shares without running the
exploration risks? The geological spread of E&P activities by Japanese companies
reflects the government’s rather slavish target since 1967 of increasing self-developedoil, both as reducing dependence on the international oil companies and as diversifying
supply resource of oil imports. Based on the government policy, JNOC’s contributions todomestic companies were defined only for the projects conducted in unexplored areas.
However, it is doubtful whether the policy was based on Japan’s position in the global oil
market, which limited her access to overseas oil exploration. Hattori (2002), an
executive director of JAPEX, specified spending most of the investment into therelatively risky exploration projects rather than acquisitions as one of the reasons why
JAPEX was not able to build overseas properties. Surrey (1974) also expressedconsiderable skepticism on the effectiveness of the policy “given the large risks involvedin exploring relatively unknown areas, and the fact that the international oil companies
controlled many of the most favorable areas.” It was not until June 2001 that the JNOC
law was amended to allow a further support also for acquisition of existing oil fields.
Consequently, the regional composition of Japan’s overseas oil development were not asmuch as expected since 1967 but kept relying on a few old fields in Middle East such as
the Khafji Field, which was discovered in 1960.

3.3 Changing mood

The ineffective project management exposed its vulnerability when the exchange rate of
the U.S. dollar to the yen changed drastically after the mid 1980s. The companies
invested for project operation and obtained revenue from oil production in U.S. dollars,
without considering the exchange risks. Thus, the rapid appreciation of the yen causedby the Plaza Accord of 1985 diminished the value of cash returns and production
revenue on a Japanese yen basis. The U.S. dollar, which stood at around 240 yen justbefore the Plaza Accord, was being traded below 90 yen in April 1995. Most of the
JNOC’s exchange loss from the loan was also recorded in this period. Unfortunately, thedecline of world crude oil price started in 1985 and made things worse. Saudi Arabia’s
increase in oil production, despite the sluggish international demand, led to the pricecollapse of 1985–86, with prices plummeting from 28 dollar per barrel to 8 dollar per
barrel before stabilizing at 18 dollar per barrel in the fall of 1986 (Griffin and Neilson,
1994). This was followed by the days of plentiful and cheap oil for 13 years, interrupted
only by a brief price spike at the time of the Gulf War 1991. These solid transformations,both in the exchange rate and in the global oil prices, dealt the accounts of projectcompanies with a double hit by compounding huge deficits for the companies’ accounts(Fig. 1).

Liquidated project companies
Oil Import Price (CIF nominal)
Oil Import Price (CIF 1997)

700

25

600
20

15

400

300

10

(No. of companies)(100 yen / kl)

500

200
5

100

0
19
73
19
74
19
75
19
76
19
77
19
78
19
79
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97

0

Data sources: Research and Statistics Department, Bank of Japan, JNOC (1987, 1997, 2005), MinistryFig. 1. Liquidation of project companies in relation to the change in yen-based crude oil
import priceThe drastic movement in the global oil market also helped in changing the people’s view

of oil as a market commodity, rather than a strategic resource. The ample production
and high liquidity of oil in the developed international oil market in those days led to oilbeing treated as a general commodity like wheat, which was relatively easy to procure
from the market. This means that public and policy leaders in Japan might not haveconsidered the priority of oil security as a serious matter. Moreover, a serious andlongstanding post-bubble stagnation in 1990s left the public opinion keen to theextravagant use of tax money, thus prioritizing economic efficiency. In particular, debate
over ineffective fiscal investment and loans to public corporations along with thevested-interest structures attracted public attention leading to the reform or
restructure of cloning systems. JNOC and the policy of promoting Japanese-developed
oil supply also became subjects under reconsideration and a number of projectcompanies were liquidated in the same period. This might be the first time that Japan
faced the dilemma of a resource-poor country caught between supply security andeconomic efficiency.

4. Technology development and the significance in oil development
In contracts for oil and gas exploration and development involving multiple participants,
the company which executes and manages the actual oil work is called an operator.
Japanese companies were involved as non-operators in 359 projects of the 401 E&P
projects during 1967–1997, which were supported by JNOC. In addition, among the 359
projects, Japanese companies gave up the opportunity of becoming an operator in 57
projects, even while holding the largest share of the projects. Yet, there were only four
projects in which Japanese companies could become operators when they collaborated
with foreign companies for the largest shareholder of the projects (JNOC, 1997).
It is essential to expand the operator project to acquire experience in the operation site
for improving the E&P technology, since upstream oil technology, which involves
integration of numerical elemental technologies, requires special experience in theoperation site. This is because resource possession influences the superiority oftechnological development. Also inversely, “operator qualification” can be acquired byevaluating past activity records, technology, operational ability, and safety management.
Therefore the less operatorship projects, the less chance to develop the expertise andtechnology in upstream oil industry.

In Japan’s case, what hampered the country’s involvement of projects with operatorshipcame from the mixed factors mentioned in the previous chapter such as the limitedaccessibility to foreign reserves or the establishment of too many but too small projectcompanies. These resulted in the lack of the experiences and capital sizes of the projectcompanies. In addition to the involvement of a number of private companies in eachproject, the shareholder compositions of project companies worsened these structuralproblems. The upstream oil projects were financially sustained by non-petroleum
industries and the structure prevented the building-up of experience and cultivation oftechnology in Japan’s upstream oil industry (Table 2). As a result, in many cases,
Japanese consortia relied on foreign partners for project operation and were entitled toonly a proportion of any oil discovered (Surrey, 1974). The “one-project, one-company”
structure resulted in increasing dependence on foreign partners of the projects, contrary
to the original target of securing independence for the domestic industry.

Table 2. Investment in oil exploration projects by sector

1970
Cumulative
Amt. in Mill.
Yen

In %

1980
Cumulative
Amt. in Mill.
Yen

In %

13,022
1,390
14,39775,49655,742
24,8384,894
2,128
20,447
19,0193,561
4,271
72,59420,060

2.3
0.2
2.6
13.4
9.9
4.4
0.9
0.4
3.6
3.4
0.6
0.8
12.9
3.6

1990
Cumulative
Amt. in Mill.
Yen
19,072
2,179
18,179188,982
71,016
29,626
5,593
2,428
22,564
20,4383,674
11,813
275,479
21,257In %Electricity
Gas
Steel
Petroleum refining, sale
Trading
Banking
Nonlife insuranceLife insurance
Shipbuilding
Chemical, fiber
Shipping
Nonferrous, mining
Petroleum development
Others

3,705
505
3,223
9,802
9,068
823
724
68
1,790
1,371
686
2,658
3,010
1,338

6.4
0.9
5.6
17.1
15.8
1.4
1.3
0.1
3.1
2.4
1.2
4.6
5.2
2.3

1.5
0.2
1.4
14.8
5.5
2.3
0.4
0.2
1.8
1.6
0.3
0.9
21.5
1.7

Total private sectors

38,77167.5

331,85958.9

692,300

54.1

JNOC

18,67932.5

232,02741.1

587,275

45.9

Grand Total

57,450100.0563,886

100.0

1,279,575

100.0

Sources : JNOC (1987), Japan Petroleum Development Association ed. (2005).

The size of capital spending and human resources for R&D shows Japanese industry’sattitude to the technology development. In 2006 two of the Japanese largest upstream
oil companies, JAPEX and INPEX Holdings spent 3,195 thousand dollars and 434
thousand dollars for R&D while ExxonMobil, which produced petroleum liquids over ten
times of these two Japanese companies, spent approximately 200 million dollars
annually for upstream R&D (Cassiani et al., 2006). In terms of human resources, thenumber of domestic petroleum engineer is decreasing. According to the 2007 research by
Japan Petroleum Development Association, there are approximately 2,500 engineers inJapan. In the demographic structure, more than 60% of them are over 40 years old andthe share of younger engineers is getting smaller. The research assumed four reasonsremaining under the situation: a reduction of new recruits reflected by the past difficult
business condition; shrinking petroleum exploration and development from thereduction of Japanese government support; diminishing number of related departments
in domestic universities; an inadequacy of public relations by petroleum industry. Thissituation is pessimistic when competing with other growing petroleum consumers suchas China, which has a number of graduates from petroleum departments every year
almost the same or even larger than Japan’s total petroleum engineers.
On the other hand it is also true that the chances of overseas development are limited
by many oil-producing countries, since they shut off foreign access to their fields. Thus,
it is necessary to develop expertise for entering into projects in open but economically or
geologically difficult fields, such as small ones or those with heavy oil. JAPEX’s
development of Canada’s oil sands is one of the promising examples. These examples
also raise necessity of technology development and further experiences in project
management. Most private companies expect JOGMEC to act as a research center for
fundamental technology and human resource development, which was difficult toachieve in the previous structure. In addition, as in the case of development projects ofultra heavy oil in oil sands, the cooperation with domestic downstream industries forsmooth delivery of the oil supplies will be required. And this is expected to be the next
step in further integration of Japan’s oil industries, which were long divided.

5.

Conclusion

The paper identifies the structural and policy issues and how they lead to longdifficulties for Japan to achieve the target of increasing overseas oil development.
Energy security as well as economic efficiency both became crucial not only for Japanbut also for any other countries, especially capitalists and resource importers. It means

that the competition for access to resources will be even more severe in next decades. In
this aspect it is essential to continue reform of Japan’s overseas oil development
focusing its attention on establishing a transparent system of the government-industry
partnership to clarify the responsibility of the projects, to reconsider locations for
exploration, to build an environment for cultivation of expertise, and to offer aconsistent emphasis on energy security. It will not be easy, but it will only become moredifficult for Japan to secure oil supplies amidst heated international competition
without such efforts.
Acknowledgements
The author would like to thank Mr. Masahiro Kakuwa, Dr. Reiji Takeishi and theSustainability Energy/Environment and Public Policy (SEPP) of the University of Tokyo
for providing expert discussions.

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