UAE PASSES SAUDI ARABIA TO BECOME JAPAN'S TOP OIL

UNCLAS ABU DHABI 001027 SIPDIS SENSITIVE STATE FOR NEA/ARP, NEA/RA, EB/IEP AND INR/EC DOE FOR INTERNATIONAL AFFAIRS:COBURN AND CALIENDO E.O. 12958: N/A TAGS: ENRG EPET ETRD JA TC SUBJECT: UAE PASSES SAUDI ARABIA TO BECOME JAPAN'S TOP OIL SUPPLIER ¶1. (U) According to official figures, UAE oil exports to Japan increased 20.6% in January 2003 from December 2002. The Emirates thus officially became the top oil exporter to Japan, shipping 1.05 million barrels per day (bpd),slightly larger than the 1.02 million bpd sent from Saudi Arabia. Almost one-quarter of Japan's oil imports now come from the UAE. ¶2. (SBU) Comment: The UAE actually exports more to Japan than these figures indicate (supplies delivered as a consequence of long-existing contracts are not reflected in official figures, particularly as they would probably indicate significant quota cheating by Abu Dhabi). In any case, we believe the UAE sends about two-thirds of its exported oil to Japan, and Japan meets close to one-third of its imported energy needs from UAE sources. The bilateral energy relationship is very close; most of Abu Dhabi's LNG exports also go to Japan and the Tokyo Electric Power Company -- TEPCO -- is an equity stakeholder in ADGAS, the main LNG producer. Yet despite continued close ties in energy, Japanese companies have been notably unsuccessful in parlaying trade into project awards. Japan sells a large number of vehicles and other durable goods in the UAE -- particularly machinery and computers -- but Japanese firms have been noticeably absent from large prestige projects in the utility and construction sectors. A number of our Emirati interlocutors have remarked that while Japanese firms come on strong in initial project presentations, they do not follow-up as aggressively as their American, European or Korean competitors and that -- in contrast to the past -- Japanese companies no longer offer the sort of attractive financing packages for which they used to be famous. WAHBA