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  • Advice to Local Businesses Aiming to Participate in the Sakhalin Projects: “Stand Up and Be Counted!”

Advice to Local Businesses Aiming to Participate in the Sakhalin Projects: “Stand Up and Be Counted!”


The giant project quickens

At the beginning of February this year, a gathering of people connected with oil and gas development was held in Sakhalin, where participants discussed such issues as budget allocations and plans of action for each of the main project’s sub-projects. According to Mr. Pavlov, Director of the Continental Shelf Mineral Resource Development Division of the Government of Sakhalinskaya Oblast, who was one of the Russian participants, Investment in Sakhalin 1 and Sakhalin 2 in 2002 was anticipated to reach $725 million (from $180 million the previous year) and $510 million (from $450 million the previous year) respectively. Moreover, with regard to Sakhalin 2, if the project costs for the full-scale development of the Piltun Astokhskoye and Lunskoye concessions, which is planned for the latter half of the year, are approved, it is likely that this figure will reach about $1 billion.

From the presentations made by those on the Sakhalin side, it seems that the project is progressing smoothly. However, given that the Sakhalin 2 Observers’ Conference held on February 7th dragged on for 17 hours, it is not hard to imagine that the path ahead will not be smooth. With regard to Sakhalin 2, little headway has been made in the selection of sales outlets for LNG, and as a result, the commencement of work on the Prigorodnoye LNG plant and surrounding infrastructure, which it had been hoped would take place this summer, seems to have been put back until the fourth quarter of the year.

Businesspeople aiming to secure orders

Meanwhile, there are plans to undertake four times as much investment in Sakhalin 1 – which last year announced the commercialization of its oil – as in the previous year. At a press conference, the president of Exxon Oil and Gas himself stated that if permission was forthcoming at the federal level, work on developing the Chaivo oilfield would begin within the year, and it is anticipated that large-scale orders to supply equipment will accompany the modernization of the Olran marine drilling rig and the construction of a coastal complex for preparing oil and gas for delivery.

Major Japanese corporations are beginning to take an interest in these moves. Once again this year, as part of its sales activities aimed at attracting business in the next fiscal year, East Japan Sea Ferry (based in Sapporo), which runs a combined cargo and passenger ferry between Wakkanai and Korsakov from May to October, focused on visiting relevant businesses in the Tokyo metropolitan area. In complete contrast to the pattern seen up to last year, when they were unable to drum up much enthusiasm, they were apparently able to gain a sense of transportation needs from the positive reaction they received.

Major mill companies have also been active in their response since last year. The February 14th edition of the Japan Metal Daily wrote with regard to Sakhalin 1, “International bidding for 80,000 tons of wide-bore UO steel pipe to be used in a pipeline transporting crude oil produced offshore from Sakhalin in Russia is expected to take place in March. The bore of the pipe is expected to be mainly 24 inches and 26 inches. With sources in the trade saying that “the pipe will be shipped in the latter half of the year, so the number of outstanding issues relating to the large-scale pipeline is likely to drop sharply”, moves by Japanese mill companies aimed at securing orders are expected…” They are requesting estimates from related companies, and an increasing number of companies are involved in the project.

Advice to businesses in Hokkaido

Amid this situation, moves by local businesses in Hokkaido still cannot be described as dynamic. From February 14th, the Hokkaido Construction News published a five-part series on The Sakhalin Business Situation: Potential for Entry by Hokkaido Construction Firms (can be accessed from the paper’s homepage: http://www.kensin.jp/. Click on the Serials and Projects button in the left-hand frame). Looking at the headlines in this series, Hokkaido businesses will heave a sigh. Overseas Transactions are one’s Own Responsibility, Technology and Costs are the Decisive Factors in Securing Orders, Specific Plans Required Immediately. One has the acute feeling that Hokkaido must be some kind of parallel universe in which normal business rules and common sense do not apply, given that the companies currently seeing these headlines and shaking their heads in despair have been able to exist so long there. To be honest, I am at a loss for words when it comes to companies who ask for advice, having taken a step back when told that technology and costs are decisive factors in securing orders.

On the other hand, it is a fact that there are companies with sufficient technical ability and cost competitiveness languishing in the obscurity of the local area. They may have had no problems until recently, being content to wait patiently until the next public works contract or other Japan-based deal came their way. However, in international business, PR is the most important thing.

Stand up and be counted!

Now on to the main theme: stand up and be counted! Outside Japan, hardly anyone even knows about Sapporo or Hokkaido, let alone has an interest in the area. The other day I was talking to a Japanese acquaintance resident in Paris, who works for a French company. When I explained about Hokkaido’s infrastructure, giving an outline of its main companies and mentioning the international interaction situation in the region, he said, “I had not even dreamed that Hokkaido was able to provide such services.” This despite the fact that they are not particularly difficult things, and are actually common businesses in Hokkaido. He himself views Hokkaido in a fairly similar light, despite having been born in Japan, so there is no way that Hokkaido would spring to mind as an obvious business partner for companies in Europe or the US. This is something of which we should be aware. Apparently, one port is planning to move to 24-hour operations from 2002. No matter how much this is trumpeted in the Japanese newspapers, if it is not actively promoted to people in related businesses, there is no way that this port will be put on the list of potential cargo transit sites. First and foremost, businesses must stand up and be counted – this is the goal for this year. It must be uppermost in the minds of businesspeople that, if they do not make their voices heard, their potential business partners will be unaware of their existence.

If they are making their voices heard, a sense of responsibility – a feeling that they must make progress – will then emerge. Moreover, in shouting about themselves, they will inspire greater vitality in the surrounding community. The key phrase for the recovery of businesses in Hokkaido – which has recently seen nothing but bad news, such as that about BSE and the problems with Snow Brand Milk Products – is “stand up and be counted – make your voices heard!” After all, even false cheerfulness is a form of cheerfulness.

[Translated by ERINA]