DUBAI (Zawya Dow Jones)--Japan will this week extend a $3 billion loan for energy projects in the United Arab Emirates to help secure long-term crude supplies, people familiar with the deal said Monday.
Japan Bank for International Cooperation, or JBIC, and state-owned Abu Dhabi National Oil Co., or Adnoc, will sign an agreement for the special purpose loan today in Abu Dhabi, a person close to the deal told Zawya Dow Jones.
The tenor of the loan will "not be more than 10 years," another person said.
Adnoc, which pumps 95% of the U.A.E.'s crude, will use the funds to boost oil and gas output, some of which Japan plans to secure to ensure stable energy supplies in the future.
Japan is the world's third-largest oil importer after the U.S. and China.
Adnoc will repay the loans by supplying crude oil to Japanese oil companies, including the country's biggest refiner Nippon Oil Corp. (5001.TO), over the next five years starting 2008, another person said.
Under the deal, Adnoc will supply the currently contracted volumes of crude oil to the Japanese companies during the period, with part of payments to be made out of the loans, the person added.
The deal will be signed during a meeting between Japan's Foreign Minister Masahiko Komura and his U.A.E counterpart Sheikh Abdullah bin Zayed Al-Nahayan, as part of their efforts to broaden their economic cooperation.
The U.A.E. account for about 25% of Japan's total crude imports. Japan consumed almost 5.2 million barrels a day of oil in 2006, according to BP PLC.
Consumers are concerned that Iran, which is locked in a dispute with the U.S. and the United Nations over its nuclear program, may disrupt the flow of oil through the Strait of Hormuz, the narrow entrance to the Persian Gulf.
The strait is the world's most important crude tanker route, with as much as 17 million barrels a day, or 20% of global consumption, being shipped through the waterway from major producing countries such as Saudi Arabia and the U.A.E.
Abu Dhabi is planning a 360-kilometer pipeline that will transport more than 1 million barrels a day of crude from production areas near Habshan inside the Persian Gulf to the East coast port of Fujairah, which bypasses Hormuz.