Japan Makes Move on Oil pipeline plan

Financial Times reports that Japan

Plans to transform the east African oil sector by building a pipeline from south Sudan to the Kenyan coast were boosted on Wednesday when a Japanese company expressed interest in joining the project.

Toyota Tsusho, the trading arm of the Japanese carmaker, said it was developing plans to build the $1.5bn pipeline, which would run for 1,400km from Juba, the capital of south Sudan, to the Kenyan island of Lamu, where an oil export terminal would be constructed.

The project would be the boldest yet by a Japanese company in Africa. China has also been studying the proposed pipeline and Toyota Tshusho said that co-operation with Beijing was possible.

The geopolitics of east Africa could be reshaped in January, when south Sudan will hold a referendum on independence. If it chooses to secede, a new country will emerge with about three-quarters of all the oil presently possessed by Sudan.

At present, the oil is exported via pipelines leading through northern Sudan to an export facility on the Red Sea. The government of the semi-autonomous south wants the new pipeline to reduce its dependence on the north and to create an export route via Kenya.

Takashi Hattori, a Toyota Tsusho executive, said the company’s plans were preliminary but that the goal was to build a pipeline with a capacity of 450,000 barrels a day, and an export terminal, the ownership of both of which would revert to Kenya after 20 years.

Mr Hattori said: “Of course, we need to discuss with the governments. But this is to show our intention to be involved.”

Japan is the only big industrialised country that buys Sudanese oil, receiving 2 per cent of the country’s petroleum exports in the first half of last year.

Japan is racing to join its fellow Asian countries like India and China to gain access to resources, raw materials and energy. China is following the recent Japanese engagement because it has

also expressed interest in the pipeline through Kenya and Mr Hattori has opened the door to possible co-operation with Japan. He said: “Maybe to collaborate with a Chinese company would be one of the options. We’d like to study any possible scheme further with the Kenyan government and the Sudanese government.”

Mr Hattori added that a “key success factor” would be securing finance from the Japan Bank for International Co-operation.

But Dennis Awori, the head of Toyota East Africa, said: “Everything is subject to very thorough feasibility studies, not to mention agreements with governments.”

If south Sudan achieves independence, the views of its government on who should build the pipeline will be crucial. “It’s all academic until we know what the south Sudanese want,” said David Raad, a business consultant in Juba. He added: “All the parties involved will be looking at the expertise, the resources and the intensity of proposals being made.”

Kenya supports the proposed pipeline as a way to bring development to its northern territories. The Toyota Tshusho executives were briefing the press in the office of Raila Odinga, the Kenyan prime minister, who visited Japan last month to discuss the pipeline and other investment opportunities.

Securing oil and other natural resources in Africa is one of Japanese diplomats main objectives, something that they share with China.  Tokyo has boosted its presence

Unlike China’s state-backed drive to secure resources and influence in Africa, Japan’s activity on the continent has been more fragmented .

Toyota Motor has a production hub in South Africa and Komatsu, a big Japanese maker of construction equipment, counts Africa as one of its biggest markets.

Toyota Tsusho’s rivals – trading companies such as Sumitomo and Sojitsu – have mining and oil interests in other corners of the continent, but they have not backed large infrastructure projects such as the Kenya oil pipeline.

Japanese funding for infrastructure has instead come in the form of government aid, which has given the country a more visible presence on the continent. Aid to improve agricultural productivity has also been abundant.

Unlike China, Japan can’t be ruthless in its Business dealings like China.  Japan isn’t criticized for its form of government or human rights like say China, which in the long run will give it an edge, just like many western businesses and corporations.  The tide is already turning against Chinese business dealings, although rather slowly, it is turning.

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