Russia, Japan sign oil exploration agreements

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, May 13 -- Japan and Russia have agreed to jointly develop an oil field in Eastern Siberia, according to an announcement by state-owned Japan Oil, Gas & Metals National Corp. (JOGMNC).

The joint venture, called INK-Zapad, will aim to develop the Bolshetirsky and Zapadno-Yaraktinsky blocks, which lie in the northern reaches of the Irkutsk region.

The Japanese corporation said it will hold a 49% stake and Irkutsk Oil a 51% stake in the venture, which will spend ¥15 billion for a study that will continue until 2013.

When the two areas are ready for commercial production, the Japanese agency will turn its interest over to a private Japanese firm and the oil will be transported to Japan via the East Siberia-Pacific Ocean (ESPO) pipeline, now under construction by Russia's OAO Transneft.

The announcement by JOGMNC coincided with a visit to Tokyo by Russian Prime Minister Vladimir Putin who urged Japanese investors to back his country's ESPO pipeline project.

"If (you) hope for an early completion (of the pipeline), I would like more Japanese firms to participate in the project," Putin was quoted as saying by officials of the Japan business federation, Nippon Keidanren.

While Japan may be interested in oil supplied through the ESPO, however, Japan's ambassador to Russia recently made clear that his country has no plans to invest in the line's extension from Skovorodino, near Russia's border with China, to the Port of Kozmino on the Pacific Coast.

"As far as we understand, ESPO leading to Japan will be built independently by the Russian company Transneft," said the Japanese Ambassador to Russia Masaharu Kono.

"Of course, Japan is interested in this pipeline. We believe that energy cooperation in the Far East and Eastern Siberia is strategic for our countries. For Russia because it can diversify the direction of its energy supply, and for Japan because it will be able to diversify its energy sources," said Kono.

"The main thing is that Russia now intends to make an 'energy window' to the East, to Asia, and on the other hand, Japan intends to make a window from the East. Our interests coincide here, and that is very important," Kono said.

For several years, Russia has been negotiating with both China and Japan over construction of the ESPO line, playing one side off against the other in an effort to boost investment in the line itself, as well as in the oil fields that will supply it.

China and Russia recently announced the completion of a $25 billion loan agreement under which a total of 300 million tonnes of Russian oil will reach China over a 20-year period via the ESPO and a 70-km connecting spur that will extend from Skovorodino to the Chinese border.

China National Petroleum Corp. announced recently that it will officially begin construction later this month of a 992-km pipeline extending from the end point of the spur to the industrial city of Daqing (OGJ Online, May 5, 2009).

Contact Eric Watkins at hippalus@yahoo.com.

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