The Japanese government plans to give state-run Japan Oil, Gas and Metals National Corp. (JOGMEC) the freedom and cash to compete better with regional rival for global energy assets.
Tokyo reportedly intends to revise a law governing JOGMEC to allow it to help Japanese companies acquire stakes in foreign oil and gas companies, either by jointly investing with them or providing a loan guarantee. The agency is currently restricted to participating in deals where a Japanese company is buying energy resources. The law is due to be presented at an extraordinary Diet session this week and could come into force before the end of this year.
The Ministry of Economy, Trade and Industry (METI), which oversees JOGMEC, has already sought a 162.8 billion yen (US$1.61 billion) supplementary budget for resource development in the current fiscal year, which ends March 2017. For next year’s budget, it will ask for this to be expanded 43% to 160 billion yen (US$1.58 billion).
“We want to reinforce JOGMEC’s ability so that it can act swiftly, as many oil producing nations plan to privatise their oil companies,” Reuters quoted the principal deputy director of METI’s oil and gas division, Daisuke Hirota, as saying. “More importantly, the revision is to provide larger risk money to encourage Japanese companies to make fresh investments in oil and gas projects in [this] tough time.”
Although a number of countries such as Saudi Arabia, Russia and Kazakhstan are looking to privatise energy assets at a time when low oil prices could produce bargains for buyers, it is not clear how much stomach private Japanese companies would have for such deals, given the uncertain outlook for oil prices.
“It’s good that there will be more funds available to buffer Japanese companies against the risk” associated with energy development, the newswire quoted the managing director at KPMG AZSA, Mina Sekiguchi, as saying. “But in the mid-term, it is uncertain how much appetite Japanese trading houses and oil companies will have in making fresh investments in energy projects after suffering from a sea of write-downs on their resource assets last year.”
Low oil prices have forced Japanese oil companies and trading houses to cut back their capital expenditure. Aggressive spending on energy assets by other big importers China and India means, however, that Japanese firms – with the help of JOGMEC – will have to spend to compete.