TOKYO�Showa Shell Sekiyu KK said it will stop its overseas exploration operations by the end of this year. It was the first major Japanese oil firm to respond to last week's call by the Ministry of International Trade and Industry (MITI) for Japanese-owned exploration projects without economic viability or political significance to be liquidated as soon as possible.
The move will cost Showa Shell a valuation loss of around �2 billion this year.
It has stakes in five exploration companies: Sodec Australia Co., Sodec Sebawang Co., Sodec Con Son Co., Soseki Oil Development Co. Of Taranaki Ltd., and Sodec Timor Co. According to Dow Jones news agency, Showa Shell will seek a foreign buyer for Soseki Oil Development Co. Of Taranaki and liquidate the remaining four companies.
The Japanese oil major said that none of the five companies has discovered oil reserves large enough to justify commercial production. They were established between the late 1980s and mid-1990s and operate mainly in Australia, New Zealand, Viet Nam, and Indonesia.
The Petroleum Council committee, which acts as an advisory body to MITI, also called for state-owned Japan National Oil Corp. to speed up the sale of its stakes in exploration ventures. Although the committee said its suggestion was intended to allow private companies greater autonomy in their operations, the government has made it clear it has had enough of pouring large amounts of public funds in often-futile exploration projects.
Analysts point out that the committee's recommendations are yet another sign of a fundamental shift in the country's energy policy. As one analyst put it, "In the past, energy security was a policy to be pursued at any cost. Officials now realize that such a policy is indeed extremely expensive, and the rewards it has reaped from it have been virtually nil."
Analysts also say that most other Japanese companies are likely to follow Showa Shell's lead: "Without JNOC financial support, the future of Japanese E&D looks almost nonexistent."