NISSHO IWAI - SUMITOMO Tie-Up in LNG Business Establishing a Joint Corporation on 50/50 Basis
Jun. 20, 2001
TOKYO(June 20, 2001)--In a daring move to meet future needs , Nissho Iwai Corporation (head office: Tokyo, Minato-ku; President: Shiro Yasutake) and Sumitomo Corporation (head office: Tokyo, Chuo-ku; President: Kenji Miyahara) reached a basic agreement today to forge a strategic alliance in the field of liquefied natural gas (LNG), which is expected to play a leading role as a clean energy source for coming generations. To that end, Nissho Iwai and Sumitomo will form a joint company to engage in wide-ranging aspects of LNG business. The new company, which will be owned equally between Nissho Iwai and Sumitomo, will take over Nissho Iwai's existing LNG businesses, as well as related organizations, personnel and investments. The new company is expected to start operations on October 1 of this year.
Nissho Iwai is a pioneer in the LNG field, dating back to a 1973 agreement that led to exports of LNG from Indonesia. During the following 27 years, Nissho Iwai has established an efficient system of successfully providing a stable supply of clean energy to electric power companies, city gas companies as well as steel manufacturers. In order to secure steady supplies of natural gas for the future, Nissho Iwai has obtained upstream interests in the Tangguh project, ranking as a top priority for the next LNG project in Indonesia. With respect to the project, Nissho Iwai has been assigned as a marketing assistant for Japan by Pertamina. In efforts to provide for alternative sources of LNG, Nissho Iwai has also been participating in the early stages of Ras Laffan LNG project set up for the purpose of liquefying natural gas of North Field, Qatar, the largest class gas fields in the world. With respect to the latter project, Nissho Iwai's comprehensive participation spans from offshore gas development, liquefaction to LNG marketing.
Likewise, Sumitomo has placed LNG business at the core of its energy business and has conducted a variety of feasibility studies in several LNG projects. In particular, Sumitomo has acquired an interest in the gas fields of the Bonaparte project in northern Australia, where it has engaged in exploration activities as well as various feasibility studies into liquefaction, transportation, and marketing, covering the entire chain of LNG business operations. Based on such studies, Sumitomo has accumulated extensive and diverse expertise and has developed sound relations with LNG users in Japan as well as with major oil companies from Europe and the United States.
Sumitomo successfully completed its ''Reform Package'', the previous mid-term management plan that ended this March, to expand core businesses and improve cost competitiveness. Sumitomo is striving to expand its earning base in the latest mid-term management plan, the ''Step Up Plan'', by allocating corporate resources strategically and utilizing its integrated strength fully. In April, Sumitomo reorganized its former mineral resources and energy businesses to form a new profit center called the Mineral Resources & Energy Business Unit. Following this strategic repositioning, Sumitomo is keen to participate in the promising new project.
It is anticipated that natural gas will play a leading role in satisfying the increasing demand for energy in the 21st century. In view of Japan's scarce natural gas resources, it is inevitable that natural resource development companies in Japan, particularly integrated trading companies, secure upstream interests in overseas gas fields. Huge investment is necessary for the development of gas fields, and for the construction of liquefaction plants and building LNG carriers. As a consequence, powerful international consortiums of prominent companies, such as major oil companies and Japanese integrated trading companies, have handled most LNG projects to date.
Nissho Iwai and Sumitomo, two of Japan's leading integrated trading companies, expect to increase their equity participation in existing LNG projects in Indonesia and Qatar. They also intend to pursue their involvement in new projects as their strategic business alliance will create the necessary synergies to tackle such projects. At the same time, both companies are planning active involvement in the natural gas trade business and LNG e-commerce, which is expected to be realized in the coming years.
The planned joint-venture company will integrate Nissho Iwai's long-cultivated solid business foundation in the energy field and Sumitomo's management principles established through its philosophy of placing prime importance on integrity and sound management. As a result, the joint company will be perfectly positioned to provide its customers with a stable source of energy. Furthermore, by developing new LNG projects and meeting global requirements for clean energy, Nissho Iwai and Sumitomo will make a meaningful contribution to global society.
[Outline of New Company]
|Name||To be determined|
|Capital||To be determined|
|Start of Operation||October 1, 2001|
|Number of employees||About 100|
|Management||Chairman of the board from Sumitomo
President and CEO from Nissho Iwai