The Japan Bank for International Cooperation (JBIC), the government's main overseas lender, will lend US$3 billion to Abu Dhabi National Oil Co (ADNOC) to secure a stable supply for Asia's biggest economy, which imports most of its oil needs.
The bank raised about a third of the loan amount from Mizuho Financial Group Inc and other Japanese banks, said people involved in the talks who declined to be identified before an official announcement. ADNOC will use the loan for oil exploration and building pipelines as well as facilities to boost crude output, the people said.
"With the UAE's [United Arab Emirates] oil structured into the loan, crude supplies to Japan are more assured," Hidetoshi Shioda, a senior energy analyst at Mizuho Securities Co, said by phone.
"It also benefits the UAE, as Japan will take steady supply for a longer period of time," he said.
Japan, the world's biggest oil consumer after the US and China, wants to map out a supply plan after crude prices set a record last month amid higher demand and competition from China and India for energy reserves.
The loan agreement will be signed this week when ADNOC's chief executive officer Yousef Omair Bin Yousef is in Tokyo, together with Abu Dhabi's Crown Prince Mohammad Bin Zayed Al Nahyan, the people said.
JBIC spokesman Ryutaro Nishizaki declined to comment. An official in Dubai at ADNOC, who wouldn't give his name, declined to comment. Masako Shiono, a spokeswoman for Mizuho in Tokyo, declined to comment.
ADNOC is boosting exploration and output to replace reserves and to meet rising demand for oil, especially from Asian nations. By 2011, the company plans to increase production of Murban, a type of crude oil, by 20 percent, Abdulla Salem Al Dhaheri, ADNOC's manager for Far East area sales, said in March.
With the rise of China and India as bigger oil consumers, Japan wants to lock in long-term supplies, the people said, even as petroleum use in the country is expected to decline 1.8 percent annually to March 2012, according to the trade ministry.
Abu Dhabi National, the biggest oil producer in the UAE, will use oil payments from Japanese refiners such as Cosmo Oil Co to pay back the loan, the people said.
The UAE is Japan's biggest oil supplier after Saudi Arabia and the fourth-biggest producer in OPEC, which pumps about 40 percent of the world's oil.
Oil purchases from the UAE accounted for about 25 percent, or 388 million barrels, of Japan's total imports last year.
Saudi Arabia, the world's biggest oil producer, overtook the UAE to become Japan's largest supplier in 2005, a year after Saudi Aramco, Saudi's state-owned oil company, bought a stake in Showa Shell Sekiyu KK. Saudi Arabia doubled oil supplies to the refiner from April 2005.
The UAE is probably boosting investment in Japan to win back the top slot it held from 1984 to 2004 as the country's biggest oil supplier, Shioda said.
International Petroleum Investment Co, Abu Dhabi's state-owned investment company, on Oct. 5 bought a 20 percent stake in Cosmo Oil, becoming the largest shareholder in the Japanese refiner. IPIC's subsidiary, Infinity Alliance Ltd, will pay ¥89.2 billion (US$798 million) for 176 million new Cosmo shares, the Tokyo-based refiner said in a statement on Sept. 18.
"If oil supply becomes more ample in the future, they have an outlet in Japan to ship their supplies," Shioda said. "They have a long-term, faithful buyer."
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