Sumitomo eyes oil, gas fields acquisition: Report
Thursday, December 11 2003 - 11:47 PM WIB
Sumitomo is in talks to buy stakes in two oil fields in Australia and one in Indonesia for as much as 30 billion yen, Michihisa Shinagawa, general manager of the Tokyo-based company's energy division, said in an interview. Sumitomo may invest 20 billion yen in North Sea oil fields by 2005, and 40 billion yen in Middle East and Indonesian gas fields, he said.
``Our aim in buying these stakes is to sell the products through our trading network,'' Shinagawa said. ``We'll bring the crude oil to Asian markets, where Singapore will increasingly become the center of Asia's crude oil trading.''
Japan's trading houses are buying energy assets to add to earnings and secure supply as China snaps up stakes in Asian oil and gas fields to fuel an economy growing at 8.5 percent a year. Sumitomo's larger rivals Mitsubishi Corp. and Mitsui & Co. both bought into gas projects in Indonesia and Malaysia last week.
``It's good for Sumitomo to look for a new pillar for growth,'' said Masahiro Fukuda, who helps oversee the equivalent of $4.6 billion at DL-IBJ Asset Management Co. Sumitomo needs to be more aggressive in business development, he said.
A Sumitomo spokesman confirmed the company's spending on oil and gas will increase this fiscal year and next from the previous two fiscal years. The spokesman, who declined to be named, wouldn't give the size of the increase.
``Sumitomo is emphasizing oil and gas development to make it a main source of profit,'' said Hiroshi Sakurai, an analyst at Mizuho Investors Securities Co. Sumitomo's share price is lower than Mitsubishi, Japan's largest trading house, partly because Mitsubishi is ahead in oil and gas, Sakurai said.
Sumitomo's shares traded at an average 616 yen since the start of the year, while Mitsubishi traded at 875 yen. Both shares have tracked gains in the 112-member Topix Wholesale Trade Index, which rose 38 percent in the same period.
Mitsubishi and Mitsui, Japan's second-largest trading house, have bought rights in oil and gas fields in the Russian Far East, Asia and the Persian Gulf.
Mitsui said last week it will buy 10.7 percent of Indonesia's Tangguh liquefied natural gas project for $236 million. Three days later, Mitsubishi, the world's largest liquefied natural gas trader, said it bought back a 5 percent stake in Malaysia's first LNG plant for an undisclosed sum.
China's CNOOC Ltd., the country's biggest offshore oil producer, bought a 12.5 percent stake in Tangguh last year and said it will invest $348 million in Australia's North West Shelf gas project, after agreeing to buy A$25 billion of LNG from the project over 25 years.
The investments reflect an increase in competition between Japan and China for energy assets.
Japan's government has offered to help pay the estimated $5.8 billion cost of an oil pipeline to link Nakhodka on Russia's Pacific coast to Japan. China has proposed building a rival $2.8 billion pipeline to Daqing in northeast China.
Elsewhere, Japan this year lost exclusive negotiating rights to develop Iran's Azadegan field, which has as much as 6 billion barrels of recoverable oil. Iran is now in talks with companies in China, Norway and Russia to develop the field.
``China's crude oil imports will surpass Japan's in the near future, so Japan will compete more with China for oil and gas fields,'' said Shun Maruyama, an economist at UFJ Institute Ltd.
Investments in Australia and Indonesia will raise crude oil output from Sumitomo-owned fields to 30,000 barrels a day from 10,000, Sumitomo's Shinagawa said. Most of Sumitomo's oil comes from six North Sea oil fields, including Balmoral and Galley.
Australian assets up for sale include Exxon Mobil Corp.'s 60 percent in the Wandoo oil field and its 20 percent of the Woollybutt field. Exxon said it wants to sell the stakes in the first quarter of next year. Sumitomo buys crude from Woollybutt under a 20,000 barrels-a-day term contract, a trader said.
Part of a stake in the Cepu oil fields in Java, which Exxon Mobil and Indonesia's state-owned oil company PT Pertamina plan to develop, are on the market. Pertamina may seek other partners in Cepu, President Director Ariffi Nawawi said last week.
Sumitomo's Shinagawa declined to say who the company is talking with in Indonesia or Australia.
Sumitomo may invest as much as 40 billion yen in natural gas fields in countries such as Iran and Qatar, Shinagawa said. Iran's gas reserves are the world's largest after Russia.
The company wants new customers in China and India for natural gas sold by LNG Japan Corp., its joint venture with trader Nissho Iwai Corp.
LNG Japan operates in Qatar and Indonesia. Sumitomo will invest in building receiving terminals for LNG in China and India to strengthen ties with buyers in those countries, Shinagawa said.(*)