Newsletter No. 1013
News-Analysis
May 15, 2008

 

JAPAN-BRUNEI ENERGY TIES AT A DELICATE STAGE

There have been two high-level visits between Japan and Brunei this month which have placed energy ties at the top of the agenda.

The most recent of these was Brunei Energy Minister Pehin Orang Kaya Seri Utama Dato Seri Setia Awang Haji Yahya bin Begawan Mudim Dato Paduka Haji Bakar’s visit to Japan. In talks with Foreign Minister Masahiko Komura on the 12th, Yahya gave assurances that LNG supplies from his country to Japan would hold steady. Brunei, it will be recalled, currently supplies about 10% of Japan’s LNG needs. They also discussed the Japan-Brunei Economic Partnership Agreement (JBEPA), which was signed last June, but which has yet to be ratified by either party. Finally, they also discussed the prospective new Japan-Brunei tax treaty.

In the first week of May, MOFA Vice-Minister Osamu Uno made a two-day visit to Brunei. Among other cabinet ministers, he met with Princess Hajah Masna, Brunei's Acting Minister of Foreign Affairs and Trade. The topics up for discussion are said to have included energy issues, the JBEPA, the promotion of tourism, technical support, climate change, peacekeeping, and North Korea.

There may be a very good reason that Japan and Brunei are stepping up their discussions at this juncture. According to a Japanese-language business news service called Data Max, recent LNG contract negotiations between the Mitsubishi Corporation and Brunei have not gone very well. The LNG contract signed in 1993 is due to expire in 2013 and Mitsubishi wishes to extend it. However, the Bruneian side is currently in a strong negotiating position and Mitsubishi was not being particularly flexible. This report, which was published on the 8th, suggests that there was some kind of crisis in the negotiations.

One wonders if the appearance of the Bruneian Energy Minister in Tokyo was an event planned well in advance or if it was something of an emergency measure to keep Japan-Brunei relations on an even keel.

At any rate, there was also some good news for this relationship about a month ago. At that time, the Brunei National Petroleum Company signed an agreement with Kokuka Sangyo (a subsidiary of Mitsubishi Gas Chemical Company) and trading giant Itochu Corporation to form a methanol transport firm to support Brunei’s first methanol plant. (We have previously taken note of the methanol plant project itself -- called the Brunei Methanol Company -- in Shingetsu Newsletter No. 858.) Kokuka Sangyo holds a 30% share and Itochu a 20% share in the company. The new joint venture's main business will be to transport the methanol produced by Brunei Methanol Company to its customers. The Brunei methanol plant itself aims to begin commercial operations in 2010.