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Japan Lends Iraq 102.8 Billion Yen for Oil Facilities

By Hector Forster and Shigeru Sato

April 9 (Bloomberg) -- Japan, which imports almost all its oil, agreed today to give 102.8 billion yen ($862 million) in loans to Iraq for reconstruction of the war-torn nation's oil pipelines and facilities such as power lines.

The 40-year loan will be given at 0.75 percent interest, according to a statement from Japan's Ministry of Foreign Affairs. The financing agreement came as Iraqi Prime Minister Nuri al- Maliki visited Tokyo to meet with Trade Minister Akira Amari and Prime Minister Shinzo Abe.

``We'd like to continue to help Iraq reconstruct its country,'' Abe told al-Maliki at the meeting. Al-Maliki said he appreciates Japan's contribution to the Middle Eastern nation over the past years.

The Iraqi prime minister's talks with Amari ``focused on the development of Iraq's power supply infrastructure,'' said Shin Hosaka, director of the trade ministry's oil and gas division.

Iraq expects to increase spending on power infrastructure to $2 billion a year from the current $1.3 billion, Hosaka quoted al-Maliki as saying.

Al-Maliki also met with Foreign Minister Taro Aso and Defense Minister Fumio Kyuma. He thanked Kyuma for Japan's decision to extend its military support mission to Iraq by two years, a ministry official said. Japan, which pulled its 600 ground troops from the country last July, has an air unit based in Kuwait that transports supplies to Iraq.

Iraq is accelerating efforts to prevent terrorist attacks and political unrest as well as deepen economic reforms, al- Maliki said during his talks with Aso.

Iraq's Oil Output

Japan last October agreed to lend Iraq $3.5 billion to finance three projects in southern Iraq: redevelopment and upgrading of a refinery in Basra, improvements to oil export infrastructure and a project to produce liquefied petroleum gas.

Iraqi oil output declined 10,000 barrels to 2 million barrels a day, according to a Bloomberg News survey of oil companies, producers and analysts on April 3. Exports averaged 1.56 million barrels a day in March, down 10,000 barrels a day from February.

Japan imported 290,973 kiloliters of crude oil from Iraq in February, according to the latest trade ministry report. Japan's total oil imports for that month were 18.7 million kiloliters.

Japan will lend 50 billion yen for upgrading oil export facilities and 32.6 billion yen will go toward rebuilding the power sector, today's statement showed. About 18 billion yen will be for the repair and redevelopment of a fertilizer plant and 2 billion yen will go toward upgrading an oil refinery in Basra.

Holding Talks

Japan's government is supporting overseas oil development to secure energy assets after state-controlled Inpex Holdings Inc. had its share in Iran's Azadegan oilfield slashed to 10 percent from 75 percent. AOC Holdings Inc. said on Oct. 3 it will extend a cooperation agreement with Iraq for research work on developing its oil fields.

Japan Petroleum Exploration Co., the country's second- biggest oil explorer, said last month it's holding talks with the Iraqi oil ministry about extending its own research agreement on four fields.

Japan Petroleum, known as Japex, signed a memorandum of understanding in March 2005 with Iraq to evaluate four oilfields there: near Baghdad and in the Western Desert, the northeast and the south.

AOC and Japex are pursuing their projects with the aim of winning oilfield development contracts in Iraq. Dependent on imports for almost all its energy, Japan is competing for overseas oil and gas projects with China and India.

To contact the reporters on this story: Shigeru Sato in Tokyo at ssato10@bloomberg.net ; Hector Forster in Tokyo at hforster@bloomberg.net .

Last Updated: April 9, 2007 06:02 EDT

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