Although Japan is a minor oil producing country, it has a robust oil sector comprised of various state-run, private, and foreign companies. Until 2004, Japan’s oil sector was dominated by the Japan National Oil Corporation (JNOC), which was formed by the Japanese government in 1967 and charged with promoting oil exploration and production domestically and overseas.
In 2004, JNOC’s profitable business units were spun off into new companies in order to introduce greater competition into Japan’s energy sector. Many of JNOC’s activities were taken over by the Japan Oil, Gas and Metals National Corporation (JOGMEC), a state-run enterprise charged with aiding Japanese companies involved in exploration and production overseas and promoting commodity stockpiling domestically. New companies were formed, of which the two largest are Inpex, now Japan’s largest oil and gas company, and the Japan Petroleum Exploration Company (Japex).
Private Japanese firms dominate the country’s large and competitive downstream sector, as foreign companies have historically faced regulatory restrictions. But over the last several years, these regulations have been eased, which has led to increased competition in the petroleum-refining sector. Chevron, BP, Shell, and BHP Billiton are among the foreign energy companies involved in providing products and services to the Japanese market as well as being joint venture (JV) partners in many of Japan’s overseas projects.
Domestic Production and Exploration: In 2011, Japan’s total oil production was roughly 130,000 bbl/d, of which only 5,000 bbl/d was crude oil. The vast majority of Japan’s oil production comes in the form of refinery gain, resulting from the country’s large petroleum refining sector. Japan has 148 producing oil wells in over 11 fields, according to the Oil and Gas Journal (OGJ).
Overseas Exploration and Production: Japanese oil companies have sought participation in exploration and production projects overseas with government backing because of the country’s lack of domestic oil resources. The government’s 2006 energy strategy plan encourages Japanese companies to increase energy exploration and development projects around the world to secure a stable supply of oil and natural gas. The Japan Bank for International Cooperation supports upstream companies by offering loans at favorable rates, thereby allowing Japanese companies to bid effectively for projects in key producing countries. Such financial support helps Japanese companies to purchase stakes in oil and gas fields around the world, reinforcing national supply security while guaranteeing their own financial stability. The government’s goal is to import 40 percent of the country’s total crude oil imports from Japanese-owned concessions by 2030, up from the current estimated 19 percent.
Japan’s overseas oil projects are primarily located in the Middle East and Southeast Asia. Japanese oil companies involved in exploration and production projects overseas include: Inpex, Cosmo Oil, Idemitsu Kosan Co., Japan Energy Development Corporation, Japex, Mitsubishi, Mitsui, Nippon Oil, and others. Many of these companies are involved in small-scale projects that were originally set up by JNOC. However, many are involved in high-profile upstream projects involving major investments in overseas ventures in recent years.