Sumitomo Plans to Boost Energy Assets by 50 Percent
Sumitomo corp.
Tomohiro Ohsumi/Bloomberg
The Sumitomo Corp. headquarters in Tokyo. Japanese trading companies including Sumitomo and Mitsubishi Corp. are boosting investments as China and India vie for energy supplies.
The Sumitomo Corp. headquarters in Tokyo. Japanese trading companies including Sumitomo and Mitsubishi Corp. are boosting investments as China and India vie for energy supplies. Photographer:Tomohiro Ohsumi/Bloomberg
Sumitomo Corp., Japan’s third- largest trading company, plans to increase investments in energy assets by 50 percent in five years amid a boom in shale-gas exploration.
Sumitomo is aiming to have 150 billion yen ($1.8 billion) of energy assets by 2015 from 100 billion yen now, Tadashi Kobayashi, general manager of Sumitomo’s energy division, said in an interview at the company’s Tokyo headquarters. The investments will mostly be in shale gas, oil and liquefied natural gas projects.
Japanese trading companies including Sumitomo and Mitsubishi Corp. are boosting investments as China and India vie for energy supplies. Exxon Mobil Corp., Royal Dutch Shell Plc and Reliance Industries Ltd. are expanding into shale-gas drilling, which involves extracting methane trapped in shale rock below the earth’s surface.
“Trading companies have been making good profits by investing in upstream resource and energy assets since the early 2000s,” Makoto Sakurai, an analyst at Mitsubishi UFJ Morgan Stanley Securities Co. said.
Sumitomo on Aug. 31 agreed to pay Rex Energy Corp. $140 million for a 30 percent stake in a joint venture in the Marcellus Shale region in Pennsylvania, its second shale-gas investment after buying a share in the Barnett Shale Gas project in Texas.
“Shale gas is very attractive” because drilling and equipments costs are cheaper than for those of conventional gases, Kobayashi said. “We expect to expand our shale gas business to Europe and Asian countries such as India, China, and Australia as we get more experience.”
Mitsubishi Corp., Japan’s largest trading house, last month signed a C$250 million ($237 million) deal to buy a stake in the Cordova shale-gas project in Canada from Penn West Energy Trust.
Sumitomo is also looking at oil investments in Africa and South America, particularly Brazil, Kobayashi said. The trading company only has assets in the North Sea, he said.
The company is planning to invest 110 billion yen in its mineral resources and energy business this year, compared with 85 billion yen in 2009, according to its annual report.
Sumitomo shares rose 0.6 percent to close at 988 yen at the 3 p.m. close in Tokyo. They’ve gained about 4.8 percent this year, compared with a 14 percent decline in the benchmark Nikkei 225 Stock Average.
To contact the reporter on this story: Tsuyoshi Inajima in Tokyo at tinajima@bloomberg.net; Michio Nakayama in Tokyo at mnakayama4@bloomberg.net.
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