TOKYO: Inpex Corp, Japan’s top oil explorer, is likely to withdraw from Iran’s Azadegan oil field project, acceding to a request from the United States due to Washington’s sanctions on Tehran over its nuclear program, Japanese media said.
Inpex and the Japanese government are likely to make the decision as the firm could otherwise be mentioned in a new list of Iran-related firms to be targeted for U.S. sanctions, the Nikkei and Yomiuri newspapers said.
An Inpex spokesman said that the company has not made any decision on withdrawing from the project, and that it would consult the Japanese government on the issue.
Kyodo news agency quoted Japan’s trade minister Akihiro Ohata as saying that Inpex was considering pulling out.
An official in charge of fuel and resource policy at the trade ministry told Reuters that Inpex, in which Japan’s government holds a 19-percent stake, was now weighing all possible options.
"Inpex said that given the current circumstances, it is putting on the table all possible (strategic) positions to consider," the official said.
Inpex would have trouble raising funds from U.S. financial institutions and its global development projects could be hindered if the company featured on the U.S. list.
Earlier this month, Japan imposed additional sanctions on Iran, following the United States and European Union in pressuring Tehran despite Tokyo’s reliance on oil imports from the country.
Tokyo also requested oil and gas companies take every caution in transactions based on existing contracts, such as the one held with Inpex, currently Japan’s sole energy-related stake in Iran.
The government also said it would exercise "utmost due diligence with strict conditions" when providing short-term export credits for trade with Iran, possibly making it difficult for Inpex to develop in the country.
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Azadegan was the OPEC member’s biggest oil find in 30 years when announced in 1999, with oil-in-place of 26 billion barrels and recoverable resources then estimated at about 6 billion barrels, and it is believed to cost at least $2 billion to develop.
The field started partial output in 2008 and currently produces about 45,000 barrels per day (bpd), Inpex said. Peak output is estimated at 260,000 bpd, but Inpex did not give any timing for when that level would be reached.
Inpex said it has so far invested about 12.4 billion yen ($148 million) in Azadegan, in which it has a 10 percent stake.
Japan’s government is the biggest shareholder in Inpex, with an 18.9 percent stake under the trade minister’s name, even after a recent multibillion dollar share sale.
The Japanese government on Sept. 3 imposed sanctions on Iran that go beyond requirements in a prior U.N. Security Council resolution, including a de-facto halt to new long-term energy-related investments in the world’s No.4 oil exporter.
Resource-poor Japan did not impose any restrictions on oil imports as Iran is the fourth-biggest oil supplier to Japan after Saudi Arabia, the United Arab Emirates and Qatar.
At that time, Japan’s then trade minister, Masayuki Naoshima, said he did not expect any major change in Inpex’s investment.
When tension was growing in 2006 between the United States and Iran over the country’s uranium processing and nuclear power development, Iran cut Inpex’s stake in the Azadegan project to 10 percent from the 75 percent share agreed in February 2004. Iran holds the remaining 90 percent.
Losing Azadegan would hurt the Japanese government’s efforts to lift the share its companies produce overseas to the equivalent of 40 percent of the country’s oil imports by 2030. ($1=83.71 Yen)
Additional reporting by Chikako Mogi, Kiyoshi Takenaka and Risa Maeda
