OSAKA – When the March 11, 2011, earthquake and tsunami led to three core meltdowns at the Fukushima No. 1 nuclear plant, an atomic calamity that effectively put the nation’s remaining 50 reactors out of action, Japan was suddenly faced with an energy crisis unseen since the oil shocks of the early 1970s.
Dependent on imports for the vast majority of its energy needs, the country had to return to burning fossil fuels, and scramble to find new sources of coal, oil and natural gas.
From Alaska to Texas to Australia to Indonesia, Japanese government officials, trading companies and utilities fanned out, putting more effort in developing relationships they already had while also searching for new energy markets.
One of the more geographically remote locations was Africa, where Japan and China, and to a growing extent South Korea and India, are in fierce competition to win contracts for energy and mineral rights on the continent.
Africa’s allure is easy to understand. Libya ranks ninth in world oil reserves, Nigeria 10th and Angola 16th. For natural gas reserves, Nigeria ranks eighth, Algeria ninth and Egypt 15th.
In addition, Africa holds 95.5 percent of the world’s platinum reserves, 58.3 percent of all diamonds, 49.2 percent of all cobalt, 45.8 percent of the chromium supply and 27.1 percent of the world’s manganese.
Securing access to liquefied natural gas from Africa is now a diplomatic priority for Tokyo.
Last year, Japan imported 87.3 million tons of LNG, with 10 percent of that — about 8.78 million tons — virtually all coming from four African nations: Nigeria (4.78 million tons), Equatorial Guinea (2.79 million tons), Egypt (1.03 million tons) and Algeria (160,000 tons). In particular, Nigerian LNG is prized by Japanese utilities for its high quality.
The importance of Africa’s resources to Japan’s energy and industrial policies has been recognized by Prime Minister Shinzo Abe’s government. It announced a new initiative earlier this month to provide ¥200 billion in financial assistance over the next five years to Japanese firms investing in African rare-earth mineral mining, and oil and natural gas development. The new initiative also includes training in resource development for 1,000 people.
“This meeting (where the agreement was signed) was the first of its kind to discuss a structural relationship for natural resource development that is win-win for both Japan and Africa, and the natural resource ministers of Africa and Japan plan to continue meeting once every two years,” trade minister Toshimitsu Motegi said.
In addition, Japanese energy firms are also looking at Mozambique’s oil and natural gas potential.
The Japan Oil, Gas, and Metals Corp. (JOGMC) announced a couple of weeks ago that it would provide equity financing to a Mozambique firm that will search for hydrocarbon deposits in two offshore areas where other natural gas discoveries have already been made.
Another JOGMC-led project, a joint venture with a Canadian firm, is currently exploring Mount Mulanje in southern Malawi for rare-earth elements.
That exploration had proved controversial, as members of a nearby community, fearing environmental damage, had filed an injunction to halt the move, which is being carried out by Mitsui Mineral Development and Engineering Co. But on May 3, Malawi’s high court overturned the injunction, and said exploratory drilling could go forward.
Given that China has control of over 90 percent of the current global market in rare-earth metals, which are used in modern electronics, finding new sources of the minerals in places like Malawi is of growing importance not only to Japan but other nations frightened of China’s potential to cut off exports. More importantly, though, is China’s growing appetite for African hydrocarbon resources, which is increasingly pitting it against other nations, including Japan.
The Japan-China rivalry in Africa is visible in Zimbabwe, where Tokyo and Beijing are struggling to secure contracts to mine the country’s extensive coal deposits. Last year, Zimbabwe’s government signed an initial contract with Japan to eventually deliver 15 million tons of coal annually. But China is also interested in Zimbabwean coal, and has announced development plans of its own.
To win influence in Africa, and help secure mineral and natural resource rights, Japan has long used the Tokyo International Conference on African Development, which was established in 1993, while China goes through the Forum on China-Africa Cooperation, which was established in 2000.
In some African countries with rich mineral resources like South Africa, Japan is especially influential. South Africa’s third-largest trading partner is Japan. Over 100 Japanese companies have a presence there. And the government is not just interested in importing South Africa’s resources but also in exporting one of Japan’s most internationally famous technologies: bullet trains.
“Japan recently funded a study on a (high-speed rail system to) connect Johannesburg and Durban in less than three hours. The Japan International Cooperation Agency is conducting a study on the South African railway industry, which will identify possibilities for cooperation between Japanese and local companies,” Yutaka Yoshizawa, Japan’s ambassador to South Africa, wrote in the recent essay “Why Japan Matters for Africa.”
“South Africa is rich in gold, chromium, platinum, manganese, uranium, copper and shale gas. And we’re dancing in diamonds, so to speak,” Mohau Pheko, South African ambassador to Japan, said at a recent press conference. “So we don’t see a competition between China and Japan. The African continent is wide with opportunities and it is up to countries interested in participating to take advantage of them.”
But any Japanese investment in South Africa’s mines needs to ensure that both sides benefit.
“Financing for the multipurpose infrastructure development must not be a burden of one stakeholder at the expense of the other. It requires clear goals and objectives to be outlined, infrastructure requirements delineated and costed and for partners in development to agree on a creative win-win formula for financing,” South African Minister of Natural Resources Susan Shabangu said at the meeting where Japan announced the new ¥200 billion financial assistance plan.
Meanwhile, in East Africa additional discoveries of oil and natural gas fields in recent years have seen Tokyo and Beijing announce new aid projects for countries in the region. Last year, Japan said it would provide a $340.6 million loan to Kenya in order to build a highway bypass in Mombasa, the country’s second-largest city.
Just a day after that announcement, China said it would extend a $100 million grant to Kenya to install closed-circuit TV cameras in major urban areas, as a way to monitor “terrorist” activities.
But despite forums like TICAD and renewed pledges by Tokyo of more aid to Africa as well as growing awareness in Japan of the importance of engaging African communities in aid projects — a lesson China has not completely learned — Beijing has several advantages. First is its deep historical and political ties with Africa, which in turn means deeper trade ties.
The International Monetary Fund, the Organization for Economic Cooperation and Development and Chinese government statistics show that the nation’s trade with Africa was worth $138.6 billion in 2011, while Japanese trade was worth just about $27.8 billion. Chinese investment has flowed into oil and natural gas projects in over half a dozen nations in eastern and western Africa.
All this means that, in a variety of international settings, especially United Nations gatherings, China can often count on a large block of African support — and votes — in a way Japan cannot.
With its policy of non-intervention in domestic affairs, China’s “business is business, and politics is politics” approach to African diplomacy allows it to secure natural resource deals in countries with dictatorships in ways that are illegal in Japan and many Western democracies.
With the United States agreeing this month to allow exports to Japan of 4.4 million tons of LNG annually for 20 years beginning in 2017, despite the lack of a free-trade accord that is normally a requirement, the pressure on Tokyo to scramble to secure ever-greater supplies from places like Africa appears to have eased somewhat.
But given the continent’s mineral and energy wealth, it seems unlikely Japan’s quest for an ideal energy mix will bypass Africa, thus the Tokyo-Beijing rivalry for energy contracts will only grow moving forward.
IN FIVE EASY PIECES WITH TAKE 5