UPDATE 1-Japan-Iran oil talks look stuck - Japan trade min http://today.reuters.com/news/articleinvesting.aspx?view=CN&storyID=2006-09-27T103249Z_01_T202846_RTRIDST_0_ENERGY-JAPAN-TRADE-UPDATE-1.XML&rpc=66&type=qcna
Wed Sep 27, 2006
(Adds details)
By Ikuko Kao
TOKYO, Sept 27 (Reuters) - Talks between Japan and Iran over a development project in the giant Azadegan oilfield appear to be hitting a dead end, Japan's new trade minister said on Wednesday.
But negotiations should continue past the deadline at the end of September as the Azadegan project is strategically important for Japan's energy security, Trade and Industry Minister Akira Amari told a group of reporters. As trade minister, Amari faces several thorny energy issues, including slow progress on Japan's investment in Iran's Azadegan oilfield, a spat over a gas field in the East China Sea, and Russia's turning the screws on Sakhalin energy projects in which Japanese companies have big stakes.
The development of Azadegan, tipped as one of the largest untapped oil reserves in the world, has become caught between international politics and energy security, and Japan should not ignore global concerns over Tehran's nuclear ambitions, the minister said.
"The talks seem to be hitting a dead end," Amari said. "One of the issues is how we interpret the deadline of Sept. 30. I don't think it is Iran's intention that everything becomes invalid after that."
Amari was appointed as part of new Japanese Prime Minister Shinzo Abe's cabinet on Tuesday.
In May, Japan spelled out a long-term energy policy to target increased imports of crude produced at equity oilfields, where Japanese companies have upstream stakes, to 40 percent of its total imports by 2030 from about 15 percent now.
"Azadegan is large as a single lot, so I am aware that it would be tough (to achieve the target) if this project faces difficulty." Resource-poor Japan has rights to the Azadegan oilfield but talks have stalled since the deal was signed in 2004, when the project was thought to require an investment of $2 billion.
Past deadlines have regularly been missed or pushed back because of split views over the valuation of the deal, including the cost of steel to be used in the project, and the extent to which the borderland field has been safely cleared of mines laid during the 1980-1988 Iran-Iraq War.
It is still not clear when INPEX Holdings Inc. (1605.T: Quote, NEWS, Research), in which the Japanese government is a major stakeholder, will be able to start development work there. The company signed a contract in 2004 to develop the southwestern part of the field.
To move the project ahead, Amari said, it is vital that Tehran accept United Nations calls to stop its uranium enrichment.
"The Japanese government will continue to send messages that Iran comply with requests from the international community. Doing so will prompt the project to progress without problems."
MORE TOUGH NEGOTIATIONS
Friction with China over the development of gas fields in disputed parts of the East China Sea is another issue that the Abe administration has to face. China is still carrying out work at the field despite Japan's repeated calls for a halt.
Amari said Japan will aim for joint development, taking the same stance as the former trade minister.
"However, the negotiations will be extremely tough. The block China is offering for joint development is different from the one Japan is offering." Ties between Japan and China, rivals for influence in Asia, have been soured by the friction as well as by former Prime Minister Junichiro Koizumi's visits to the controversial Yasukuni war shrine.
Abe has not spelled out his views on visiting the shrine.
"The new prime minister has not made his stance clear on Yasukuni," Amari said. "I understand it is his message that he wants to keep it distant from politics."
Sakhalin Island, in Russia's far east, is the most recent concern to emerge surrounding Japan's energy security, but Amari played down signs of trouble. Russia this week piled pressure on the foreign companies involved in massive energy projects there, ordering a full environmental probe of Royal Dutch Shell's (RDSa.L: Quote, Profile, Research) Sakhalin-2 oil and gas project. "Sakhalin-2 will find a way. The basic contract (regarding the project development) is not scrapped," Amari said.
The minister said Sakhalin-2 will move on by solving environmental concerns and letting Russian gas monopoly Gazprom (GAZP.MM: Quote, Profile, Research) join the project.
Moscow's move spurred criticism from European countries and Japan, as Sakhalin-2 involves the construction of the world's biggest liquefied natural gas plant, which would supply gas to customers in Japan, the United States and Asian countries.
Shell has a 55 percent stake in the project, while Japan's Mitsui & Co. Ltd. (8031.T: Quote, NEWS, Research) and Mitsubishi Corp. (8058.T: Quote, NEWS, Research) own a combined stake of 45 percent.
© Reuters 2006. All Rights Reserved.