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Interview

with Seikei Nakamura, Chief Representative, Sojitz Corporation

06.09.2007 / Energyboardroom

Please tell us about the origin of the company and how your career has brought you where you are today.

The two Japanese companies Nissho Iwai Corporation and Nichimen Corporation merged just over three years ago to create the Sojitz Corporation. I joined Nissho Iwai in 1992 and spent four years in its finance department. I was then moved to the power department and was involved in projects in places like Pakistan and Mexico. I was stationed in Istanbul between 1998 and 2002, where I was in charge of handling power, petrochemical, and potential energy projects. Afterwards, I was sent back to Japan and was named in charge of all energy-related projects, including O&G. Now it has been over a year since I am representing Sojitz in Indonesia, in this country I am Chief Representative of Sojitz Corporation Jakarta Liaison Office, dealing with projects and investment opportunities, particularly in oil and gas. In this regards PT Sojitz is dedicated to trading of all kinds of products in Indonesia.

How important is the Oil & Gas sector within Sojitz’s large and diversified portfolio? What are some of the company’s main O&G activities?

The Energy and Mineral Resources division is one of the leading divisions in Sojitz, and represents more than 30% of the company’s total profits. It is definitely one of the core divisions, and therefore key to future growth opportunities.

Our activities and investments in the energy sector are diversified. We are in a 50-50 LNG joint venture with Sumitomo Corporation, the company is called LNG Japan Corporation. This company has been involved in exporting LNG from Indonesia to Japan since the late sixties. It is also the number one energy trading company in the country. In addition, we own 7.35% share in the Tangguh LNG project which will be on stream next year and they have some assets in Qatar and are trying to develop some energy projects in Nigeria. Some of our main assets now in Oil and Gas upstream are in the Gulf of Mexico and the North Sea while we also have producing assets in other countries like Gabon, Egypt and Qatar. Currently, our Energy Development Department is focusing on acquiring more oil and gas producing fields around the world.

Coal is another of the activities we are also very much involved in. Initially we began with just trading, but now we are investing heavily in the coal mines themselves. For example, here in Indonesia we own a 10% share of PT Berau Coal in East Kalimantan. We are very involved in promoting clean coal technologies (CCT) in Indonesia. Indonesia has such an abundance of low rank coal, but its transportation is difficult because of its higher moisture condensation. This is why we have been developing four technologies for low rank coal utilization: coal to oil (liquefaction), coal to gas (gasification), upgrading brown coal (UBC) and mine mouth power plant. Through these alternative technologies we would like to be a partner in helping Indonesia break away from its oil and gas dependency for domestic energy.

How important is Indonesia within your O&G activities?

For the whole of Sojitz Corporation, Indonesia has been identified as one of the six priority markets. Indonesia is certainly one of the most important countries for Japan’s energy needs. We are delighted to help Indonesia develop its oil, gas and coal potential so that it can export to Japan and other countries. I believe that the best solution for Indonesia is to continue developing its gas production for exports, and focus the enormous coal potential for the local energy market.

In downstream, we have 85% of PT Kaltim Methanol Industri in East Kalimantan, producing about 660,000 metric ton per year. This makes us the largest single methanol producer in Southeast Asia. Most of the production is exported to Japan, but we are also selling to Indonesia and other countries in the region. We also have a minor share in PT Trans-Pacific Petrochemicals Indotama, the so-called Tuban project, which is in Central Java.

Another sector we are doing business with is Petrochemicals. The national fertilizer company is facing difficulties to keep up with production because of lack of natural gas in Indonesia. The utilization of coal in its gas form (utilizing coal gasification technology) matches the material they need. We can help the Indonesian industry by offering them this gas for the production of petrochemical products such as fertilizers.

How much potential do you see in Indonesia for extending your upstream assets in the Oil and Gas industry?

Right now it is a difficult thing to accomplish in Indonesia due to the record-high oil prices. Everyone wants to acquire these kinds of opportunities, and companies already owning them are trying to expand their piece of the cake in the country. In other countries we have been working on marginal gas fields, small to medium sized, and this is the kind of upstream business we could eventually do in Indonesia. What we do have is the ownership of a FPSO available in Indonesia for offshore upstream activities.
We have a long and close relationship with Medco, from way back when they started their business as a drilling company. We may look into similar opportunities with other companies in Indonesia.

We position ourselves in niche fields in the O&G industry. We are not out to compete with the big oil companies, which are able and willing to take on high risk projects. What we can do is help small or medium companies to add value to their operations.

What is the current reputation of Sojitz in Indonesia? How are you getting your brand recognition?

Both of the companies that merged to form Sojitz have a very long time of doing business in Indonesia and are well known. Many people are still not so familiar wit the Sojitz name, so I have to often use our old names and keep telling everyone that I have to use our former company name sometimes. We have to keep telling everybody that Nissho Iwai and Nichimen have merged. Brand recognition is one of our main priorities, but I believe that good achievements will get our name into the market.

I can say that for clean coal technology, we are the number one company in Indonesia. My colleague Mr. Makino has been involved in CCT for over ten years, when nobody thought about low rank coal utilization because oil prices were low. He has been developing this on the field, and now we are seeing the fruits of these efforts. Regarding coal bed methane, we have done feasibility studies for potential CBM development in South Sumatra which were financed by Jetro. I see that now other companies aggressively want to invest in CBM here in Indonesia. That is ok, but we like to take slow but firm and steady steps.

On what areas have you collaborated with Lemigas?

We did some feasibility studies for EOR on East Kalimantan funded by the JBIC. Now we are collaborating with them on CBM Feasibility Study in South Sumatra.

You seem like an ideal partner for the Indonesian government’s future plans, capable of investing and participating in the development of a wide range of energy sources?

We are very happy to collaborate with the Indonesian government, and share similar objectives and considerations. Of course we do not agree on everything and we have discussions. But in the end it is in everyone’s interest that the energy is used in an efficient and environmentally-friendly manner.

Where do you see Sojitz 5 years from now, what is its position in Indonesia‘s O&G sector?

I believe that we will have increased our assets in Indonesia, in O&G, coal, CBM. We are also looking at getting involved in energy projects. The Sojitz name should be familiar to everyone. We will also increase our trading activities. We need to unite the value chain, integrating business activities from the acquisition of raw materials to the final sale.

Any final message for OGFJ’s readers?

We are looking forward to doing business here, and to helping strengthen relations between Japan and Indonesia.

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