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A major topic loomed large during Tuesday’s first official visit to Canada by Japanese Prime Minister Shinzo Abe: building a long-term energy relationship for the benefit of both.
It’s well known that energy-poor Japan has been eyeing Western Canada’s abundant natural gas deposits as a new energy source, particularly since the Fukushima disaster in 2011 shut down its nuclear industry, and that Canada is equally motivated to sell energy to Japan as a way to diversify its energy markets away from the United States.
The big hurdle to what could be a union made in heaven is price: Japan is struggling to pay the premium prices for imported liquefied natural gas (LNG) that are prevailing in Asia, partly due to its own increased demand since Fukushima, and is bargaining hard for a new energy deal with Canada that it can afford.
While contracts are ultimately the domain of the market, Abe told reporters in Ottawa the two countries agreed to co-operate more closely on natural gas and praised Canada as a stable source that can provide natural gas at competitive prices. Showing it means business, Japan Inc. has moved en masse to Canada over the past two years to sweeten the relationship through investment.
A dozen or so of Japan’s corporate giants now have a beachhead in Calgary — from Mitsubishi to Hitachi, Inpex to Toyota. Major Japanese financial companies could be next.
Some have already invested in major energy projects. Others are looking for an entry point.
“Japan is very poor in natural resources,” Susumu Fukuda, Japan’s consul general in Calgary, said in an interview. “Over 92% of the oil is imported from the Middle East and other Asian countries. So Canada is a very important import possibility to promote diversification of natural resources.”
Japan’s rush has been quiet compared to China’s controversial advance in Western Canada, which culminated with last year’s takeover of Nexen Inc. by CNOOC Ltd.
The main reason is Japan’s deal-making style: Unlike Chinese companies that look for corporate control, Japan’s players prefer partnerships and joint ventures, which raise fewer concerns about foreign involvement in Canadian energy resources.
An outright “takeover is not welcome by Japanese companies,” Fukuda said. “The business style is more friendly — partnerships, joint ventures — because it could be more stable and more comfortable as a way to do business in foreign countries.”
While Japan and China appear to be in a race to lock up as much of Western Canadian deposits as they can, Fukuda said the two countries often work together and in fact are partners in some Canadian projects.
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