“Independence Ratio” Shows A Major Oil Buying Spree Coming

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“Independence Ratio” Shows A Major Oil Buying Spree Coming

Brazil president Michel Temer confirmed this week that state oil firm Petrobras will not be privatized. Ending speculation that the oil giant could be opened to foreign investment.

Firms like Petrobras are becoming a hot target these days. Evidenced by an announcement yesterday from one of the world’s largest oil and gas importing nations.

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Japan.

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Japanese officials gave an update on that country’s “independence ratio” — a number that’s become a key metric in measuring energy security. And found that the situation when it comes to oil and gas imports is concerning.

Here’s how the independence ratio works. The figure is the percentage of Japan’s total oil and gas imports met by production coming from fields controlled by Japanese companies worldwide.

As the figure below shows, this week’s update on the ratio was not encouraging. With the latest numbers showing that Japanese companies now provide 27.4% of Japan’s total petro-imports — barely any improvement from the previous tally of 27.2%.

Japan’s independence ratio for oil and gas imports didn’t show much growth the past year

That stall follows three years of strong self-sourced import growth for Japanese companies — which raised the independence ratio from just over 20% in FY2011.

And Japanese lawmakers said this week the growth must continue. With the government officially setting a goal to raise the independence ratio to 40% by 2030.

To do so, Japanese companies are going to require major investments in international oil and gas projects. With such firms’ typical MO being to provide financing in exchange for equity stakes in fields and production.

All of which is great news for oil and gas project developers — suggesting we’re likely to see continued financing appetite from Japanese firms globally (just this week, Japanese producers INPEX and Itochu signed a 25-year deal on oil concessions in Azerbaijan held with BP). Watch for more Japanese farm-in deals coming on oil and natural gas projects globally.

Here’s to going indie,

Dave Forest

Article by PiercePoints

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Dave Forest writes Pierce Points Free Daily E-Letter, an advisory on mining and energy read every day by BP, Rio Tinto, JPMorgan, BNP Paribas, Repsol, GDF Suez, GE, Platts, Warburg Pincus, and the UN. Sign up for free at www.piercepoints.com. Mr. Forest has funded and managed over $80 million in global exploration and development in natural resources, and continues to design and develop projects globally. He is a professional geologist.
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