Satoshi Asawa – General Manager, JOGMEC, Abu Dhabi
JOGMEC’s General Manager, Satoshi Asawa, discusses the company’s core areas of responsibility, how the company’s Abu Dhabi office is bolstering Japanese energy security demands and how engagement with the Abu Dhabi market has been steadily ramping up over time.
State-run Japan Oil, Gas and Metals National Corp (JOGMEC) acts as an extension to government by offering a mix of financial assistance and technical support to Japanese companies’ oil and gas exploration and production around the world. Can you please start by introducing JOGMEC’s function in Abu Dhabi and how your engagement with the emirate has evolved over time?
JOGMEC is a governmental agency that collaborates with state apparatus and private companies both at home and abroad with a view of securing stable supplies of natural resources and energy for Japan, while simultaneously contributing to the development of hydrocarbon resources and extractive industries worldwide, as is the duty of a large energy-consuming nation. Our core areas of responsibility constitute oil and gas, metals, coal and geothermal energy. We join hands with Japanese private sector actors in each of these four areas offering up a portfolio of services encompassing geological surveying, technological development, financial support, stockpiling, environmental protection and information sharing. International cooperation and collaboration is also at the forefront of our activities which are designed to ensure stable supplies of natural resources and energy both of which are indispensible to livelihoods in Japan.
Bolstering national energy security is indeed the overarching mission of JOGMEC’s Abu Dhabi office, one of 13 bureaus that we maintain round the world. This relates directly to the strategic significance of the Gulf region as a source for our hydrocarbons. Japan is, of course, heavily dependent on oil and gas imports to power its economy as our domestic production volume is very limited. 30 percent of those imports derive from Saudi Arabia, with a further 20 to 25 percent coming directly from the UAE. Where we can be beneficial is by deepening collaboration with Abu Dhabi’s national oil company, ADNOC, and its subsidiaries and also through closely supporting Japanese enterprise in its attempts to secure and retain oil and gas concessions.
Our engagement with the Abu Dhabi market has been steadily ramping up over time. Since 2000, we have been collaborating directly with ADNOC, broadening and deepening our memorandum of understanding (MOU) in 2013. The footprint of Japanese enterprise has also been increasing with E&P companies like INPEX’s subsidiary, Japan Oil Development Company (JODCO), Abu Dhabi Oil Company and Bunduq intensifying their activity especially in the offshore domain and we have naturally been on hand to support wherever possible. The granting of a 5 percent ADCO concession to INPEX last year is a case in point.
What sorts of support can JOGMEC deliver to Japanese owned oil and gas firms?
Oil and gas E&P projects require considerable amounts of investment and it can be difficult for Japanese outfits to compete when going head to head against the super-majors in bidding for concessions. JOGMEC can deliver equity capital to help mitigate their exploration risks and, after the commercial discovery of reserves, can further provide liability guarantees to support their finance.
What was JOGMEC’s contribution to the award of the ADCO 5 percent concession to INPEX?
The technical proposal for ADCO’s concession was jointly produced by us in tandem with INPEX, we assisted with financing the acquisition cost of ADCO’s 5 percent stake and we expect them to utilize our R&D center during this new partnership. We have longstanding collaborations with ADNOC as well as ADMA-OPCO, but the new ADCO concession is a very attractive addition. 5 percent might not sound like much but we are talking about considerable volumes of oil and we consider it the fulfillment of a fundamental part of our mission to be increasing the overall volume of Japanese flag oil. The award thus represents a major announcement for both Japan and INPEX and we are immensely proud of the role we played in helping to bring the arrangement to fruition.
When we interviewed Japan’s ambassador to the UAE, Kanji Fujiki, he spoke of the challenges posed to Japanese enterprise by counterparts from emerging economies in the Far East such as Chinese and Korean companies. What do you see as the main competitive strengths of Japanese oil and gas firms?
Japanese E&P companies remain highly competitive in terms of their technological prowess and advanced human capital. These are areas where Japan has developed formidable expertise and where we are highly regarded internationally. Our own MOU with ADNOC on technical cooperation is emblematic of the reach of the ‘made in Japan’ brand and covers a wide spectrum of issues from reservoir characterization to assistance with hydraulic drilling to provision of high-level training for engineers.
The decline in oil prices has adversely impacted Japanese E&P players in the same way as it has affected all industry actors by compelling them to roll out cost optimization programs, enact cutbacks and undertake structural reforms to their business models. JOGMEC nevertheless remains ready to support them in their quest to retain and gain oil concessions.
You mentioned the high proportion of hydrocarbon imports coming from Abu Dhabi. Just how important is the UAE as a stable, reliable and economic source of energy supply to Japan?
The UAE is vitally important to Japan in terms of our energy security. It constitutes our second largest oil exporter delivering over 800,000 barrels per day. Beyond the sheer volumes that we are importing, the structural fundamentals of the country also make it highly appealing. We are talking about a very open economy and a market where oil companies can obtain their own concessions. The contract system is very different from some of the other Gulf States such as Saudi Arabia and Kuwait that work only on a service contract basis. As with Qatar and Oman, you can secure your own blocks through production sharing which means you end up with a higher degree of energy security.
Abu Dhabi is today a great source of constant, uninterrupted and dependable supply and this stems from the excellent relationship that we have built over time with our Emirati counterparts. Obviously JOGMEC doesn’t possess its own operations, but we do work very closely with ADNOC and its various subsidiaries collaborating on subsurface monitoring and EOR studies and providing human resource development programs in which their personnel receive technical training in Japan. Indeed, many of ADNOC’s senior management have participated in such training schemes at some point. The end result is a strong and enduring trust-based relationship between our countries.
In November 2014 JOGMEC purchased around 1.26 million barrels of Abu Dhabi Das crude from general trading company, Itochu Corporation, for the national government’s strategic petroleum reserves. To what extent does this reflect Japan’s shifting petroleum import preferences?
Japan has been increasing the amount of light crude grades in its stockpiles since the turn of the century and the Abu Dhabi Das crude, will to some degree replace stockpiles of 1.89 million barrels of medium sour Mexican crude. Purchasing crude is generally a domain for private businesses, but JOGMEC does play a critical function in resource stockpiling. Because Japan is the 5th largest consumer of energy in the world and yet imports virtually all of its energy resources it is necessary for us to prepare for potential disruptions to our energy supply chains and to ensure that contingency plans are in effect. JOGMEC accordingly plays a leading role in promoting the stockpiling of petroleum and petroleum gas at the explicit request of the Japanese government.
Another big boost to Japan’s energy security scenario is of course the aforementioned award to INPEX of the 5 per cent stake in Abu Dhabi’s onshore concession area for 40-year period as part of ADNOC onshore concession renewal program. In addition to ensuring 40 years long of stable oil supply, this decision proves highly effective for Japan’s energy security in that the oil supply can be transported through an oil pipeline and shipped from the emirate of Fujairah facing the Indian Ocean without needing to pass through the Straits of Hormuz. Given the current strained relations between Iran and Saudi Arabia and the real potential for disruption to shipments transiting the Straits we are immensely happy to have been able to diversify our supply routes.
Another great area of collaboration has been your contribution to carbon dioxide enhanced oil recovery (EOR) in the Lower Zakum field. Please update us on this initiative.
From an environmental standpoint carbon dioxide capture and reduction is urgently required as underlined by the global agreement reached recently at the COP 21. What’s more, along with ADNOC’s continuous aspiration to technical challenge, the UAE’s geological profile of multiple discoveries that have yet to be developed mixed with large-scale maturing fields, renders the country in many respects a perfect place to be pioneering latest technologies in EOR.
ADNOC’s production target is 3.5 million barrels which is partly contingent on them hitting their ambitious goal of 70 percent EOR when the international benchmark is more like 25 to 30 percent. Even with crude oil prices sinking to abnormally low levels, the UAE is still forging ahead with these objectives. JOGMEC, for its part, is glad to be able to offer assistance alongside our technical partner in JODCO and EOR actually constitutes one of our major strengths where we have unique capabilities and knowledge to transmit garnered from extensive experience worldwide.
Here in Abu Dhabi, we have been working alongside ADMA-OPCO on the emirate’s first carbon dioxide EOR pilot test in the offshore domain. Having established a strong track record on similar projects in Mexico, Turkey, Vietnam and other geographies, we feel well placed to apply our learning and technologies towards what is an altogether more demanding project due to the subsea environment and considerable distance between the source of carbon capture and final location within the reservoir.
What would you say are your key priorities looking forwards?
To support Japanese businesses operating abroad in the oil and gas space, to demonstrate our unwavering commitment to developing a sustainable UAE energy sector in line with the ambitions of ADNOC and the Abu Dhabi government, and to guarantee Japan’s own energy security and lines of supply. It’s a win-win-win triangle.
Our deep relationship with the UAE is inextricably linked to Japan’s own energy future and, bearing that in mind, we remain attentive to the long-term time horizon. The oil and gas industry is inherently cyclical and the historical trajectory of oil prices indicates an upward curve despite cycles of volatility around that pathway. Anticipating future oil spikes, we need to be using the current window of opportunity to craft our energy security strategy and shore up the supply chains through deeper integration with our partners and widening the search for new opportunities to increase the overall volume of Japanese flag oil.