State-run Japan Oil, Gas and Metals National Corp (JOGMEC) will boost investment in overseas oil and gas projects this year, disbursing an amount almost equal to the upstream investments made since it was established as it races to secure supplies.
Spending on investment in oil and gas projects is expected to surge to more than 90 billion yen ($1.12 billion) in the year through March 2013, Hirobumi Kawano, president of the energy explorer JOGMEC said in an interview.
That compares with investments of 106 billion yen in energy projects since JOGMEC was formed in 2004 from the combination of two agencies. The world's third-biggest economy is on a global quest to secure oil and gas supplies after last year's Fukushima crisis knocked out the country's nuclear capacity that accounted for a third of total power supplies.
"From the long-term point of view, investments in upstream assets will help reduce energy costs and allow Japanese customers to acquire energy at a discount," Kawano told the Reuters Global Energy & Environment Summit.
"There will be a spike in spending this year as several large investment projects are in the pipeline," he said.
That is in line with the government's plan to boost JOGMEC's budget for investment in overseas oil and gas projects by 60 billion yen this financial year.
The government-backed agency was assessing more than 20 oil and gas projects, including shale-gas in areas such as Canada, U.S. and Vietnam, Kawano said. He declined to specify individual investment plans.
The rush for energy assets is taking companies like Tokyo Electric Power (9501.T), the operator of the wrecked Fukushima nuclear plant, and trading house Mitsubishi Corp anywhere from North America's shale formations to Australia's gas fields.
Tokyo Electric said it was in talks with JOGMEC, Nippon Yusen KK (9101.T) and Mitsubishi to help it invest in Australia's Wheatstone gas field, which is being developed by Chevron Corp (CVX.N), and secure gas supplies for power plants.
The companies are looking at paying $4.4 billion for a stake. Kawano, however, declined to comment on the investment.
JOGMEC signed an agreement last week to search for oil in Kenya and is on a final list of 47 pre-qualified bidders for oil exploration rights in Iraq in an auction due later this month.
"Participation in upstream development allows stable supply and help cut asset acquisition costs as they generate returns in the form of dividend payments to investors," Kawano said.
LONG HOT SUMMER
Japan faces the possibility of power shortages during the upcoming summer months and a threat of mandatory cuts for only the second time since the oil shock of the 1970s, when compulsory savings were introduced after oil prices surged following an Arab oil embargo.
The government will announce energy savings measures as early as this week that may include mandatory cuts as public opposition to nuclear power has meant the shutdown of all 50 plants for maintenance with no timetable for restarts.
The last plant closed on May 5.
Japan spent 12 trillion yen on crude imports and 5.4 trillion yen on overseas LNG purchases in the year ended March.
Imports of gas and oil will rise further this year because of the idling of the nuclear units, Kawano said.
JOGMEC, which was formed when Japan's separate energy and mineral explorers merged, assists in acquisitions by Japanese companies through direct investments and loan guarantees.
The agency spent 40 billion yen in the year ended March on the acquisition of gas and oil assets. One of the investments last year was a roughly 10 billion yen equity financing by JOGMEC of exploration for oil in Malaysia by a unit of JX Holdings (5020.T) in October.
The same month, it agreed to invest about 16 billion yen and take about 49 percent of a venture with energy explorer Inpex Corp (1605.T) looking for oil and gas under the Banda Sea in Indonesia.
The government will unveil a new energy policy in the summer after scrapping plans last year to increase the reliance on nuclear energy to more than 50 percent. The new policy is expected to boost investment in upstream projects further.
"It's likely that our budget on gas and oil exploration will rise further next year depending on the new policy," Kawano said.