Staff writer If Arabian Oil Co.'s last-ditch negotiations with Saudi Arabia to renew its 40-year oil drilling rights fail, the pioneer Japanese driller will be hard hit, but officials don't fear a national crisis. With his firm's rights in the Khafji oil field in the former neutral zone between Saudi Arabia and Kuwait due to expire Sunday, Arabian Oil President Keiichi Konaga is expected to fly soon to Riyadh for the final round of talks. He will try to win the renewal with an offer of up to 75 billion yen to help finance a controversial railway construction project, but the prospect for success seems to be diminishing. Should the talks fail, a subsidiary of Saudi Aramco, Saudi Arabia's state-run oil firm, will take over operations upon the expiration of Arabian Oil's drilling rights, severely damaging the major Japanese oil developer. Despite the fuss over the issue, which has also involved government-to-government negotiations, the overall impact on Japan's energy security would be limited, at least for the time being. The government-level negotiations have already ended in a stalemate as Riyadh has stuck to its demand that the Japanese government grant 200 billion yen for the railway construction. It refused Japan's counteroffer of an 800 billion yen investment package, including a 140 billion yen preferential loan for the railway project. The Japanese government has said it sees little rationale for spending 200 billion yen in taxpayers' money in exchange for the renewal of a single firm's drilling rights. In the Khafji oil field, Arabian Oil produces some 280,000 barrels of crude oil per day, of which some 166,700 barrels are shipped to Japan, accounting for barely 5 percent of the nation's crude oil imports. Speaking at a news conference Tuesday, Konaga said his firm is committed to keeping alive a separate deal with Kuwait, which is due to expire in early 2003, to operate the remaining half of the oil field in question. "Even if the negotiations (with Riyadh) fall through, it wouldn't bring Arabian Oil's business to a standstill." But Konaga admitted that his firm's earnings -- 180 billion yen for the business year that ended in December -- would be halved and its 2,000-employee operation would have to be restructured under such circumstances. The firm's share price stood at 850 yen as of Wednesday, plunging sharply from 1,804 yen on Jan. 14, just before the breakdown of the government-level negotiations. As for Japan's long-term policy of developing oil fields, the expiration of Arabian Oil's drilling rights means that Japan would lose one-third of the oil produced from the overseas oil fields developed by Japanese firms. "The oil field represents our reminiscences of the late Taro Yamashita," said a senior official of the Ministry of International Trade and Industry, referring to the founder of Arabian Oil, who drilled the Khafji oil field. -- the first feat of its kind for Noting that Japan is one of only two countries granted rights to an oil field by Riyadh, he added, "It also symbolizes the friendly relations between Japan and Saudi Arabia, and serves Japan's long-term energy security policy," the official added. Recalling the oil crises in the 1970s, some people underscore the importance for resource-poor Japan to pursue striking oil even at the cost of taxpayers. Another senior MITI official in charge of energy, who declined to be named, acknowledges that the development of oil fields of Japan's own is the second-surest way, next to stockpiling oil, to prepare for an emergency. Japan had reserves expected to last for 164 days as of the end of fiscal 1998. But there has been mounting criticism over inefficient Japanese developers -- including those affiliated with the quasi-governmental Japan National Oil Corp. -- vis-a-vis major international oil companies of the West. "The issue concerning Arabian Oil's concession is a major turning point for Japan in considering what its future development of oil fields ought to be," said a subcommittee member of MITI's Petroleum Council. The subcommittee's deliberations on MITI's basic policy on oil development have been delayed by the stalled negotiations on the oil concession, the subcommittee member said. By the early 21st century, Japan aims to almost double imports of oil developed by Japanese firms, which stood at 676,600 barrels a day and accounted for 15 percent of its total crude oil import at the end of fiscal 1998. "Failure of the concession negotiations would jeopardize that goal, which should work together with the stockpiling in case of an emergency," said Tsutomu Toichi, a director at the Institute of Energy Economics, Japan. "It would be a great disadvantage to Japan, whose oil consumption depends 99.7 percent on imports and whose economy depends more than 50 percent on petroleum," he said. Both Saudi Arabia and Japan stress the continued importance of bilateral strategic relations, especially as Saudi Arabia is the world's largest exporter of oil and Japan the second-largest importer and consumer of oil. However, the recent concession negotiations, Toichi said, are bound to leave an unpleasant aftertaste for both sides. Saudi Arabia must, for example, be disappointed that the Japanese side once proposed to build the mining railway but later changed its stance after finding the result of the feasibility study unpromising, he said. While Europe and the United States have strong bargaining power as arms exporters, Japan has no choice but to resort solely to business cooperation, which cannot always win support from the private sector, he added. Meanwhile, the import of oil from the Middle East accounted for 82.1 percent of Japan's oil imports as of December. "Depending on oil from the Middle East is the most natural and reasonable way for Japan to cope with energy security in peacetime," said the senior MITI official in charge of energy.