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The main supplier of Japan

The successful cooperation of Japanese corporation JOMEC and LugaNeft Company (LNC) to jointly develop oil and gas fields in Eatern Siberia indicates the impending expansion of Japanese businesses in Russia. The president of JOGMEC, Hirobumi KAWAHO told Kommersant. 

State Japanese corporation, JOGMEC (Japan Oil, Gas and Metals National Corporation), serves as a leading supplier in Japan, responsible for the uninterrupted supply to the islands from other countries of the strategic raw materials (oil, gas, nonferrous metals, etc.), without which Japan's economy will be sustainable. Corporation established in 2004, based on two government agencies - Japan National Oil Corporation and the Metal Mining Agency of Japan. JOGMEC has involved in 324 projects in research and development of oil and gas fields in Asia and Oceania, the Middle East, North and South America, and now in Russia. JOGMEC initiates projects, then sell their shares in them to private Japanese companies. JOGMEC conducts research in the field of technology in oil and gas, mining and energy resources, manages, develops strategic plans to supply oil, gas and metals, etc to Japan.

- What motivated JOGMEC to enter into Russia? Didn’t you regret it?

- In 2003, Russian and Japanese leaders met each other and signed the Joint Action Plan to strengthen bilateral cooperation. During the meeting, the Russian leader (President Vladimir Putin .- "b") announced plans to establish a system of transporting oil from Eastern Siberia to Pacific Ocean, which today is known as ESPO. Japanese side agreed then on joint action to ensure the resource base for filling ESPO, which marked the beginning of the energy cooperation between Russia and Japan. Since JOGMEC has launched search for partners of exploration of oil reserves in Eastern Siberia, we have found such a partner in the LugaNeft Company.

The transition from exploration to industrial development phase generally takes six to seven years, however, if the Russian authorities will give the permission, we would like to start production of the "early" oil within three to four years. The accelerated pace of work are motivated by the desire of the Russian leadership for achieving ESPO route to the Pacific coast in 2014. We would like to contribute to filling this new pipeline.

- How do you assess investment climate in Russia?

- We started these projects, almost without knowing anything about the peculiarities of Russia's investment climate. In recent years we have studied the situation, including the entire set of laws, rules and regulations that govern our operations. Our partner, LugaNeft supports us very well. Now we can say that JOGMEC know the Russian legislation better than those who have not entered from Japan, in particular the part which deals with the exploration and exploitation of hydrocarbons. And we are willing to share this knowledge with potential Japanese investors to facilitate their entry into the Russian business.

Everyone is waiting for the completion of the ESPO pipeline to the Pacific coast to begin using this new route with reasonable tariff f of oil transportation. But now, the effect of the first stage of the route that reaches only to the station Skovorodino and by rail to the Pacific is obvious; even in this first phase commencement, the amount of Russian crude oil imports to Japan rose from 6% in 2008 to 9% next year. From the port of Kozmino, tankers ship to Japan for a day or two, while it takes weeks from Middle East.

Completion of construction of ESPO will mean the significant increase in the presence of Russian oil to Asia Pacific markets. I think that all companies operating today in eastern Siberia want the Russian government to maintain the current benefits of mineral extraction and export duties on crude oil. We are sure on this. Promotions of upstream projects has a great importance for consumers in Asia Pacific and Russia.

- What kind of impression does JOGMEC have on Russian partners? What kind of advise can you offer to new entering in Russia?

- At all stages we work with specialists of LNC. We jointly assessed the prospects of Severo-Mogdinsky field before applying for participation in the auction, since there was practically absent geological information. There was no drilled well and survey data were outdated. We were required to make joint intellectual efforts to select a point for drilling exploratory wells together. Our first experience in the Tyumen region has raised us deep respects for Russian geology and geophysics, for specialists from LNC, who demonstrated extensive knowledge and vast experience in the work. As they say in Russia, "You should not take steps with your own customs into monastery where you have not been" We have a similar proverb in Japan.

- In many countries JOGMEC in fact make the way and projects for Japanese private companies. What is your plan in Russia?

- Specify the size of commercial resources, and preparing the transition of fields for industrial development, we will invite Japanese companies here for their development and production. This does not mean that we will disappear from the projects. With creating a Japanese consortium, JOGMEC will participate in it as an investor, who will continue to finance the project.

- Then one natural question arises about the JOGMEC's plan to acquire new licenses for prospects in Russia.

- We are looking for opportunities to expand operations in Russia. With our partner, LNC has considered the prospects of a number of new licenses, and intends to keep looking in that direction. Moreover, if an offer of cooperation from other Russian companies, we are open to discussing partnership.

Interview by Michael Krutikhin, RusEnergy

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