Japan yesterday signed a US$3 billion (Dh11.01bn) loan to help to develop Abu Dhabi's oil industry as well as 10 other deals in areas ranging from health care to education to support the emirate's economic diversification drive.
The state-owned Japan Bank for International Cooperation (JBIC) will supply the loan to Abu Dhabi National Oil Company (Adnoc) in return for guarantees of oil supply to the world’s third-biggest economy.
“I am pleased that Japan can contribute to the development of Abu Dhabi’s oil industry,” Toshimitsu Motegi, Japan’s minister of economy, trade and industry, said after the signing of the deal in the capital.
The loan was provided on the condition "that crude oil will be supplied to Japan", he said, without specifying an amount.
Japan relied on Abu Dhabi for 22 per cent of its total crude imports last year, averaging 793,000 barrels per day.
The country’s energy needs have become more acute following the tsunami and earthquake in March 2011 that crippled the Fukushima nuclear power plant and raised broader questions about the country’s strategy to secure much of its energy from domestic nuclear sources.
It is the third time Japan has extended a loan to Adnoc to support the company’s oil supply capacity. JBIC, the country’s export credit agency, previously provided $3bn loans each in 2007 and 2010.
The repayment of the latest loan will be over a five-year period, said Mr Motegi.
The repayment period corresponds to the emirate’s goal of expanding oil capacity over the next five years, from about 2.8 million barrels per day now to 3.5 million by 2018.
Japan has emerged as one of the few foreign players within Abu Dhabi’s oil industry. It holds two small offshore concessions and stakes in two huge offshore joint ventures with Adnoc alongside western majors such as BP, Total and ExxonMobil.
But the latest deal comes as Japanese companies seek to secure a slice of lucrative Second World War-era onshore oil rights, which expire at the start of next year.
The Abu Dhabi Company for Onshore Oil Operations (Adco) concession, as the prized set of oilfields is called, accounts for half the emirate’s crude output.
“The relationship between Japan and Abu Dhabi pre-dates the establishment of the UAE,” Nasser Ahmed Al Sowaidi, the chairman of Abu Dhabi Department of Economic Development, said yesterday.
“It goes back to year 1968 when the first contract for oil concession was signed between a Japanese company and Abu Dhabi Government.”
But Abu Dhabi is increasingly keen for Japanese business to play a bigger part in the emirate’s push to diversify into non-oil segments of the economy.
Mr Motegi and Mr Al Sowaidi oversaw the signing of 10 agreements yesterday between the two sides to work more closely in areas including education, health care, research, human resources and industry.
“Today’s agreements signify the view held and shared by both sides that significant innovative technologies are the key to a prosperous future,” said Mr Al Sowaidi.
* with additional reporting by April Yee