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Japan to hike 2015-16 upstream budget for Africa, Latin America exploration, acquisitions

https://www.chemnet.com   Sep 01,2014 Platts
Japan's Ministry of Economy, Trade and Industry aims to hike its budget for exploration and acquisitions in fiscal 2015-16 (April-March) with a focus on securing new assets in Africa and Latin America.

In a plan being submitted Friday, August 29, to the Ministry of Finance, METI will ask for a Yen 59 billion ($568.2 million) budget for upstream exploration and asset acquisition in fiscal 2015-16, up 25% from Yen 47.2 billion in the current fiscal year.

In its 2015-16 budget request, METI will also ask for a new budget of Yen 22 billion for helping local refiners' optimization and integration of their refining facilities in response to the ministry's regulations, ministry officials said.

METI's requested increase in its upstream exploration and asset acquisition budget comes as Japan aims to diversify its supply sources away from the Middle East, which supplies around 85% of Japan's oil requirements, by acquiring new assets in East Africa and Latin America, the officials said.
The requested increase in the budget, which will be used to support Japanese companies through state-owned Japan Oil, Gas and Metals National Corporation, follows a series of oil and gas discoveries in East Africa and Mexico's recent opening up to foreign investment for the first time since nationalizing its oil industry in 1938.

On July 25, Japanese Prime Minister Shinzo Abe met Mexican President Ernesto Pena Nieto in Mexico City.

At the summit meeting, Abe called for advancing bilateral cooperation between Mexico's state-owned oil and gas company Pemex and the Japanese government and private sector in upstream oil and gas developments as well as for potential LNG supplies from Mexico.

The overall budget request for 2015-16 oil and gas developments totals Yen 104 billion, up 13% from Yen 92 billion in 2014-15. It includes a Yen 14 billion budget request for methane hydrate development programs, which is 10.2% higher than the Yen 12.7 billion in the fiscal 2014-15 budget.

The year-on-year increase in the methane hydrate program budget request comes as METI plans to extend its area of geological survey of shallow methane hydrate offshore Akita in northwestern Japan and prepares for the next round of offshore output test of methane hydrate in fiscal 2015-16, the official said.

METI has also earmarked Yen 48 billion for supporting Japanese companies' acquisition of natural gas assets, developments and liquefaction businesses in such regions as North America in fiscal 2015-16, the same earmark in the current budget.

NEW BUDGET FOR REFINERY CONSOLIDATION

In the downstream sector, METI is requesting a new budget of Yen 22 billion for helping Japanese refiners' prospective investments for consolidating or optimizing their refining facilities as part of their response to the ministry regulations.

On July 31, METI enforced a new regulation that could result in trimming the country's installed refining capacity to around 3.55 million b/d by the end of March 2017.

The expected reduction amounts to about 400,000 b/d or 10% of the current installed capacity of 3.95 million b/d if refiners decide to respond to the policy by cutting their crude distillation capacities.

METI is requiring Japanese refiners to submit their response plans by October 31.

Under the new regulation, Japanese refiners are expected to increase their residue cracking capacity to 50% by the end of March 2017, up from 45% on March 31, under a revised definition of the capacity.

The revision counts the capacity of units such as fluid catalytic cracking, residue direct-desulfurizing and solvent deasphalting units in addition to previously been considered units -- cokers, residue fluid catalytic crackers and residue hydrocrackers -- for the residual cracking capacity of local refiners.

Unlike the previous regulation, the new policy would consider taking into account local refiners' reductions in nameplate CDU capacity as well as more efficient use of residue at adjacent refineries by building new pipelines.
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