Japan Leaps to Boost Energy Role in Azerbaijan, Central Asia
The world’s third biggest economy has had accelerated talks with Azerbaijan and Central Asian countries to increase its stake in local energy projects.
Delegations from Azerbaijan and Turkmenistan visited Japan last week, while Tokyo and Tashkent announced on July 15th they are keen to boost economic ties.
Japan ranks second after the United States in terms of outflow foreign direct investment (FDI). Statistics show Japan’s FDI stood at roughly $119 billion in 2014, down from $135 billion in 2013.
Even so, Japan unveiled a plan in May to increase funding for Asian infrastructure projects.
Japan plans to contribute $100 billion over 5 years to the new Chinese-led Asian Infrastructure Investment Bank (AIIB).
Azerbaijan and Central Asian countries are keen to attract these new investment funds.
Azerbaijan
An Azeri delegation headed by Rovnag Abdullayev, CEO of State Oil Company of Azerbaijan Republic (SOCAR), travelled to Japan this week. During a July 18th interview with Azerbaijan’s ANS TV, Abdullayev revealed that Baku has been in talks with Japanese banks regarding an $8 billion loan to fund its Oil and Gas Processing and Petrochemical Complex (OGPC) project. The proposal has a processing capacity of 12 billion cubic metres of gas and is capable of producing 800,000 metric tons of petrochemicals annually.
Abdullayev added that Japanese companies will purchase a stake in the project.
SOCAR sources recently told Natural Gas Europe that foreign investors can establish joint ventures with the company with respect to OGPC, but SOCAR wants to maintain at least a 51% share in the project.
During his visit to Tokyo, Abdullayev met with officials from the Japan International Cooperation Agency as well as the Japan Bank for International Cooperation, which has taken part in the financing of Turkey’s Star refinery. SOCAR is building the $5.5 billion refinery to supply feedstock to petrochemicals maker Petkim.
Hiroshi Watanabe, CEO and Governor of the Japan Bank for International Cooperation, met with SOCAR officials at a recent Asian Development Bank conference, held in Baku in May.
Abdullayev also met with the directors of Itochu Corporation and Mitsui Group, and visited Japanese energy engineering giant JGC Corporation.
Mitsui built the North-1 thermal power plant in Azerbaijan 14 years ago, and is preparing to break ground on the North-2 power plant by the end of 2015. The production capacity of each plant is 400 MW.
Turkmenistan
On July 16th, Japanese Prime Minister Shinzo Abe met with Baimyrat Hojamuhamedov, Deputy Chairman of the Cabinet of Ministers of Turkmenistan.
According to a Turkmen government communiqué, the meeting focused on attracting Japanese investment, modernizing the oil and gas industry in Turkmenistan, and diversifying supply routes for Turkmen gas.
Previously, Turkmen President Gurbanguly Berdimuhamedov visited Tokyo in 2013 in hopes of securing a $10 billion energy-related investment package.
The meeting saw Turkmengaz, Turkmenhimiya, and Turkmenoil sign agreements with Japan’s Nippon, Sojitz, Sumitomo, Chiyoda, JGC, ITOCHU, TOYO, Mitsui, Tsukishima, Mitsubishi, and Kawasaki.
Construction of a Turkmen natural gas chemical complex for producing polyethylene and polypropylene began last year in the Caspian coastal region of Kiyanly. The $3.4 billion project is being developed jointly with TOYO Engineering and a consortium of companies including South Korea’s LG International Corporation and Hyundai Engineering Corporation Ltd.
According to AKIpress, the annual production capacity of the complex is 386,000 metric tons of polyethylene and 81,000 metric tons of polypropylene.
Japan’s Kawasaki and Turkey’s Rönesans Holding are also investing in another Turkmen plant to process natural gas into gasoline.
Uzbekistan
On July 15th, Uzbek Foreign Minister Abdulaziz Kamilov met with Japan’s Parliamentary Vice-Minister for Foreign Affairs, Kentaro Sonoura, in Tashkent.
During the meeting, both sides signed several investment and loan agreements in addition to various technical assistance projects worth $3.8 billion.
Japan has invested $2.5 billion in the country so far, an increase from the $1.8 billion invested in 2012.
Prior to the Tashkent meeting, a delegation headed by Uzbekistan’s first Deputy Prime Minister and Minister of Finance, Rustam Azimov, took part in the 12th session of the Uzbek-Japanese Committee on economic cooperation held in Tokyo in January.
The group met with Japanese Deputy Prime Minister and Finance Minister Taro Aso, Minister of Economy, Trade and Industry Yoichi Miyazavoy, Chairman of the Bank of Japan Haruhiko Kuroda, senior management from the Japanese International Cooperation Agency (JICA), the Japan Bank for International Cooperation (JBIC), various state agencies, and other leading Japanese companies.
In the past few years, many Japanese companies such as Itochu, Mitsui, Marubeni, and Mitsubishi have opened offices in Tashkent.
Ilham Shaban is Director of the Azerbaijan Centre for Oil Studies, in Baku