The Financial Times
By Bayan Rahman
Jun 27, 2001
Takeo Hiranuma, Japan's trade minister, will visit Iran next month for negotiations on a Japanese oil consortium's bid to explore Iran's Azadegan oilfield.
The visit will be the first by a Japanese trade minister since 1979 and emphasises the importance that Tokyo places on the deal, worth about Dollars 8bn. It could be Japan's largest oilfield development project if assumptions about Azadegan prove right.
Mr Hiranuma's visit to Iran will come at the end of a tour starting on Tuesday of Japan's other main oil partners - Saudi Arabia, Kuwait and United Arab Emirates. Japan is negotiating the renewal of a drilling contract with Kuwait and Japan's Abu Dhabi Oil is seeking to increase production in the UAE.
Japan is dependent on oil imports, 85 per cent of which were from the Middle East last year. The loss of a concession last year in Saudi Arabia's part of the Neutral Zone between Saudi Arabia and Kuwait was a blow to Japan. It was also an incentive for Tokyo to expand oil supplies from other countries and to improve its bargaining position.
In November, Iran granted Japan first negotiating rights to develop part of the Azadegan oilfield, but the Japanese consortium, comprising Indonesian Petroleum, Japan National Oil, Japan Petroleum Exploration and Tomen trading company, sought a European partner among Royal Dutch/ Shell, TotalFinaElf and BP.
It chose the Anglo-Dutch oil group because of the company's technological know-how and involvement in other Iranian oil projects, Japanese government officials said.
Investment in the Azadegan development was expected to be about Dollars 8bn but the Japanese consortium and Royal Dutch/Shell were still negotiating who would bear the larger share of the cost, the officials said.
Mr Hiranuma is expected to pledge the government's financial support for the project during his meetings in Tehran. Japan has already offered Iran a Dollars 3bn credit line over three years as a sweetener.
The Japanese are gambling on the US not implementing the Iran-Libya Sanctions Act, which looks set to be extended for five years from August. The act bars US oil companies from doing business with Iran and allows the president to impose sanctions on non-US companies investing in Iran's energy sector.