Joint gas field development by China and Japan is unlikely to slake the energy thirst of Asia's two largest economies but could lead to wider cooperation over vital resources, analysts said on Wednesday.
Japan and China agreed on Wednesday to jointly develop one of several disputed gas field in the East China Sea, following a long-standing row between the Asian powers over lucrative drilling rights for natural gas.
“The accord is likely to lead to further cooperation between the two countries in the field of energy, which is crucial for both of them,” said Kensuke Kanekiyo, an expert at the Institute of Energy Economics in Tokyo.
However, the deal is seen as only a small step in the right direction.
“The deal would be significant politically, but it is unlikely to improve the two countries’ energy situations dramatically,” said Hirofumi Kawachi, a senior analyst at Mizuho Investors Securities.
The two Asian giants guzzle massive amounts of energy.
Japan has almost no natural energy resources of its own and buys more than 90 percent of its oil from the Middle East. China also relies heavily on energy imports to fuel its double-digit economic growth.
The two countries are also competing to secure oil supplies from Russia’s Far East while cooperating in areas such as energy saving technology.
“For Japan, [the gas deal] is part of the country’s long-term efforts to reduce its heavy reliance on oil imports from the Middle East,” said Yoshihisa Miyamoto, an analyst at Okasan Securities.
“For China, securing stable energy supplies is a pressing need to sustain its booming economy,” Miyamoto said, describing the accord as “a practical compromise.”
Analysts said soaring crude oil prices made the development of the gas fields an even more attractive proposition.
Japanese companies will participate in the existing Chinese development of the Chunxiao gas field, which Japan calls Shirakaba, Tokyo said on Wednesday.
Chunxiao is located just west of the Japanese-proposed median line. Tokyo has previously voiced concern that China may siphon gas from its own side of the line.
The field has explorable reserves of 63.8 million barrels of oil equivalent, while the whole of the East China Sea could yield up to 3.26 billion barrels, according to data from the Japanese and Chinese governments.
The two countries are also set to jointly develop the Longjing field, or Asunaro in Japanese — the northernmost of four gas fields near the median line, media reports said.
Japan consumed 97 billion cubic meters of gas in 2006, or 610 million barrels of oil equivalent, almost all of which was imported, the International Energy Agency said.
Han Xuegong (韓學�?an independent oil analyst in Beijing, said there should be no technical obstacles to the gas field development.
“Economically it depends on the oil price,” he said, adding that given current market conditions the project should be worth the required investment.
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