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Japan will provide an initial $1bn in concessionary loans to the Abu Dhabi National Oil Company in return for longer-term oil supply contracts as part of a push by Tokyo to secure more stable supplies from the Gulf.
The loan to Adnoc complements an innovative deal signed in Riyadh on Saturday, under which Japan will store Saudi Arabian oil in Japanese reserve tanks in return for preferential access in times of emergency.
The deals, announced at the start of a five-day tour of the Middle East by Shinzo Abe, Japan’s prime minister, is a sign of the country’s desire to raise its influence in the region. Mr Abe is travelling with nearly 180 businessmen, including the heads of many of the country’s biggest companies.
Japan, which is entirely dependent on foreign oil and gas, has grown more worried about securing stable energy supplies in the face of furious competition from energy-thirsty nations such as China and India. Its concern has been exacerbated by its failure to diversify from Middle East oil supplies following recent setbacks to promising energy projects in Iran and Russia.
Under the Abu Dhabi deal signed on Sunday, the Japan Bank for International Co-operation, a sovereign trade promotion and international development body, is ex-pected to extend an initial $1bn of cheap loans to Adnoc for hydrocarbons and infrastructure projects. Precise financial terms were not disclosed. In return, Japan expects Abu Dhabi to extend the length of oil supply contracts from the customary year to as long as 10 years. It also hopes the emirate will look favourably on renewing Japanese oil concessions when they start to come up for renewal over the next few years.
The Japanese government has set a target of raising the percentage of oil imports in which its companies have a direct concession from about 15 per cent now
to 40 per cent by 2030. The United Arab Emirates accounts for about half of Japan’s overseas concession rights, a foreign ministry official said.
Under the proposed deal with Saudi Arabia, Japan would store Saudi oil in Okinawa. Tokyo would offer Saudi Arabia access to part of the tanks, which can store up to 10 days of Japanese oil requirements.
The scheme, proposed during a meeting between Mr Abe and Saudi Arabia’s King Abdullah in Riyadh, would give the kingdom a foothold in Asia from where it could export to the region and the west coast of the US. In return, Japan would obtain preferential access to Saudi oil in times of emergency.
Referring to what he said was “a new era of Japan’s relations with the Middle East”, Mr Abe said: “I want to build multi-layer economic relations beyond those traditional relations based on oil.”
Foreign ministry officials said Japan was keen to help Gulf states diversify into non-oil sectors to help build closer economic ties and promote greater stability in the region.