JAPAN NEEDS MORE OIL
PLATTS wrote, state-owned Japan Oil, Gas and Metals National Corporation, or Jogmec, on Wednesday said it is set to provide financial support for domestic companies to acquire foreign upstream companies.
The announcement comes after a revision in the law covering Jogmec's capabilities took effect Wednesday.
The Japanese cabinet in October had approved a bill to amend a part of the law that defines the capabilities of Jogmec -- as part of its effort to boost the country's equity oil and gas output -- and this was passed by the parliament on November 11.
Tokyo sees the current low oil price environment creating "a significant chance for acquiring [upstream] stakes and assets," as well as the need to facilitate upstream investments amid slowing investments globally, Yuki Sadamitsu, director of the oil and gas division at the Ministry of Economy, Trade and Industry said in an interview with S&P Global Platts last month.
The current environment also generates a window of opportunity for helping to develop Japan's core upstream company, by getting a bulk of upstream stakes through acquisitions of independent E&P companies overseas, Sadamitsu had said.
Following the enactment of the bill, Jogmec has expanded its capabilities.
Jogmec will now be able to support domestic companies' acquisitions of foreign upstream firms and their capital tie-up as well as provide the Japanese companies with additional financial support through the development stage of their projects.
Jogmec will also be able to acquire shares in state-owned national oil companies.
Previously, Jogmec did not provide any finance to Japanese companies' projects that were at the development stage, except for providing loan guarantees for the companies' development costs.
As part of the revised law, Jogmec has also gained a framework to borrow up to Yen 324.8 billion ($2.97 billion) from commercial banks in a fiscal year (April-March), with a government debt guarantee to support Japanese companies' acquisitions and upstream developments from the exploration stage through to the development stage.
In a related development, METI has also secured a supplementary budget of Yen 162.4 billion for the upstream oil and gas sector in fiscal 2016-2017, with Yen 150 billion earmarked to support Japanese companies' acquisition of foreign upstream companies.
The supplementary budget combined with the previously approved Yen 92 billion budget and the ability to borrow Yen 324.8 billion once the bill is ratified will take Jogmec's maximum available finance in the current fiscal year to Yen 579.2 billion.
Japan hosted the Group of Seven industrialized nations summit in May, when the leaders committed to play a leading role in facilitating upstream investment to stabilize energy prices and ensure economic growth.
Japan aims to increase its share of oil and gas equity liftings to 40% by 2030 from 27.2% in fiscal 2015-2016.
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