Identifier
Created
Classification
Origin
07TOKYO478
2007-02-01 23:25:00
CONFIDENTIAL
Embassy Tokyo
Cable title:  

ANRE'S HOSAKA DISCUSSES RUSSIA, CHINA ENERGY ISSUES

Tags:  PREL PGOV ENRG ECON JA CH RU 
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RHHJJPI/PACOM IDHS HONOLULU HI
RUEHIN/AIT TAIPEI 6313
RHMCSUU/DEPT OF ENERGY WASHINGTON DC
C O N F I D E N T I A L SECTION 01 OF 02 TOKYO 000478 

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DOE PLEASE PASS TO DOE/PI: DPUMPHREY, JNAKANO; PARIS FOR
US/OECD

E.O. 12958: DECL: 01/30/2017
TAGS: PREL PGOV ENRG ECON JA CH RU
SUBJECT: ANRE'S HOSAKA DISCUSSES RUSSIA, CHINA ENERGY ISSUES

REF: TOKYO 355

Classified By: Ambassador J. Thomas Schieffer for reasons 1.4 (b,d)

C O N F I D E N T I A L SECTION 01 OF 02 TOKYO 000478

SIPDIS

SIPDIS

DOE PLEASE PASS TO DOE/PI: DPUMPHREY, JNAKANO; PARIS FOR
US/OECD

E.O. 12958: DECL: 01/30/2017
TAGS: PREL PGOV ENRG ECON JA CH RU
SUBJECT: ANRE'S HOSAKA DISCUSSES RUSSIA, CHINA ENERGY ISSUES

REF: TOKYO 355

Classified By: Ambassador J. Thomas Schieffer for reasons 1.4 (b,d)


1. (SBU) Summary. Agency of Natural Resources and Energy
(ANRE) Petroleum and Natural Gas Division Director Shin
Hosaka accompanied ANRE Director General Harufumi Mochizuki
on a visit to Moscow the week of January 29 to talk to
Gazprom about Japanese companies aiding the construction of a
gas infrastructure in Eastern Siberia. Japanese companies
are uninterested, however, because of the difficulty of the
projects. Hosaka expressed frustration over Gazprom's
takeover of Sakhalin 2 and praised ExxonMobil's management of
Sakhalin 1, although he complained that its gas likely would
go to China. He lamented the lack of cooperation from China
over the East China Sea oil and natural gas dispute and
blamed the warming relations between the two countries,
claiming it prevents Japan from pressing China too hard to
resolve the issue. Hosaka also expressed his relief that the
Azadegan issue has gone quiet because it allows him to focus
more closely on Japan-Russia and Japan-China energy issues.
End summary.

Eastern Siberia
--------------

2. (SBU) Econoff met with ANRE Petroleum and Natural Gas
Division Director Shin Hosaka on January 30 to discuss his
visit to Moscow the previous week with ANRE Director General
Harufumi Mochizuki. Hosaka explained that the purpose of the
visit was to hold discussions with Gazprom about creating a
supply system for Eastern Siberian gas projects. ANRE and
Gazprom signed an energy cooperation agreement in November
2005 which included energy exploration, pipe-laying and the
construction of down-stream facilities in that region; this
meeting between Mochizuki and Chairman of Gazprom's
Management Committee Alexey Miller was the first meeting
since the signing of the agreement. Gazprom is seeking
Japanese technology and Miller asked Mochizuki to identify

Japanese companies who would work on the East Siberian
projects.


3. (SBU) Hosaka related that the Japanese companies he had
spoken to this week about Miller's request had all reacted
negatively to working with Gazprom because the Eastern
Siberian projects are difficult. In addition, Japanese
companies are uninterested in the natural gas found there
because it is unpure and contains too much helium, making it
difficult to convert to liquefied natural gas (LNG),which is
the preference of Japanese companies. According to Hosaka,
TNK-BP, a Russian-British consortium, has yet to profit from
its projects in the area.

Sakhalin 2
--------------

4. (SBU) Hosaka complained about the tough negotiation
tactics of the Russians over Sakhalin 2, calling the outcome
unfair. Because it is a commercial enterprise, the GOJ can
do nothing to change it, however. He criticized Shell for
hammering out an agreement with Gazprom for a 25 percent
share of Sakhalin 2 before revealing that the cost of the
project had doubled. This greatly angered Gazprom and ended
the negotiations. Shortly afterward, the Russian government
began to pursue Shell over the project's environmental
violations.

Sakhalin 1
--------------

5. (SBU) Hosaka spoke highly of ExxonMobil's management of
Sakhalin 1, particularly the way it had handled the
environment. Hosaka also noted that ExxonMobil has a good
relationship with the Russian government. ExxonMobil is
still negotiating a pipeline to China for Sakhalin 1's
natural gas, but Hosaka seemed convinced that the pipeline
would be built. Japan and India, both of which have stakes
in Sakhalin 1, have protested because they would like the gas

TOKYO 00000478 002 OF 002


to be converted to LNG for their own consumption. Hosaka
commented that Japan and India's combined share in Sakhalin 1
is 50 percent whereas ExxonMobil's is only 30 percent and yet
ExxonMobil likely would ignore the two countries' wishes and
sell the gas to China. Hosaka also noted anger in the Diet
that despite the large amount of Japanese government money
originally invested in exploration of Sakhalin, Japan likely
would receive none of its gas. Hosaka said that Sakhalin 1
was likely to make a healthy profit whether Japan bought its
gas or not and he hoped that would appease those angry over
the gas being sold elsewhere. Japan is unlikely to build a
pipeline for the gas due to protests by fishermen over
potential damage to their fishing grounds.

East China Sea
--------------

6. (SBU) Hosaka complained that the Chinese are not
cooperating in the effort to achieve a resolution to the
dispute over oil and natural gas production in the East China
Sea. ANRE and Japan's Ministry of Foreign Affairs continue to
try to engage China on the issue with little success. The
main bone of contention remains the question of where the
exclusive economic zone boundary between the two countries
lies. Japan has called for a line halfway between the two
countries while China insists that everything up to the edge
of its continental shelf belongs to China. The Chinese also
refused to attend a technology experts meeting, which the two
sides agreed to create during the Japan-China talks in July
2006, because of the lack of agreement over the boundary.
(Note: Japan and China have convened a legal panel to discuss
the boundary but have yet to reach a conclusion. See reftel.)
Hosaka noted that Prime Minister Shinzo Abe has already met
with Chinese leaders several times and the improved relations
between the two countries makes it difficult for Japan to
apply too much pressure on China to resolve the problem.
Chinese Prime Minister Wen Jiabao is expected to visit Japan
in April and the subject likely will be raised again then.

Azadegan
--------------

7. (SBU) Hosaka expressed his relief that the Azadegan issue
has gone quiet because it allows him to focus more closely on
Japan-Russia and Japan-China energy issues.

Comment
--------------

8. (C) Hosaka was far more relaxed at this meeting than he
has been to date. He spoke in clear, heavily accented
English. He was very forthcoming, often offering information
without prompting, which is a change from previous encounters
where he was more cagey. Hosaka's predecessor, Hirofumi
Katase, was a major champion of Azadegan so it is
unsurprising that Hosaka would be relieved to see the
Azadegan problem recede into the background.
SCHIEFFER