Japan Energy Article

Contributor
Japan’s position as Australia’s biggest gas customer, buying 80% of Australian gas exports, and its substantial investments in Australian LNG projects has helped ensure the development of Australia’s multi-billion dollar industry.
However, speaking at the Australian Gas Export Outlook 2014 conference in Brisbane this week, Shinichi Kihara of Japan’s Ministry of Energy, Trade and Industry (METI) warned that Japan’s doubling of gas imports due to its nuclear shutdown would not last forever.
“We are still in the aftermath of the Fukushima disaster … we used to have 30% of our power from nuclear, and today it’s zero,” he said, noting that the 300 kilowatt hours previously supplied by its nuclear industry represented “Australian and New Zealand power added together.”
The lost nuclear power had been replaced two-thirds by gas imports and a third by oil along with coal, but Kihara said the government was working to reduce the nation’s high import dependency of 90%, which was causing higher costs and worsening the trade balance.
“It took three years after Fukushima to rebuild our energy strategy, and finally in April the Cabinet adopted a new strategic energy policy for Japan, a medium- to long-term strategy for the next 20 years,” he said, which notably, “has no numerical targets” for share of energy source.
“The principle for our energy strategy is diversification … we will use all energy sources, including nuclear, renewables, coal and gas,” he said.
According to Kihara, all 48 of the nation’s nuclear power plants had been shut down for safety checks following the March 2011 disasters; however, the new safety body was working to restart at least one plant later in 2014 among the 18 targeted for reopening.
“The new nuclear safety authority is working on the front-runner in Sendai … and we hope the green light from the authority will come soon. But even after the authority gives the green light, the utility company has to negotiate an arrangement with the local government … a gentleman’s agreement that they have to work on local issues. So I hope the first restart will happen some time later this year,” he said.
The nuclear restart would add to Japan’s reduced demand for gas, with other sources such as coal-fired power, domestic resource development and increasing energy efficiency also curbing demand, he said, along with a long-term decline in population.
“New suppliers of LNG are entering the market, especially the U.S. We see potential supply exceeding demand, especially after 2017-18, and only those projects that provide LNG at a competitive price will be able to secure demand and actually materialise,” he said.
Kihara also said Japan had made major investments in North American LNG plants, with the aim of reducing import prices that currently are more than four times the U.S. Henry Hub price. He said Japanese companies have invested in U.S. projects, which would provide 20% of Japanese total gas demand, with first gas deliveries expected in 2017 at a price about 20 to 30% lower than current prices.
Shigeki Hirano, chairman of Osaka Gas Australia, noted a massive buildup in global LNG capacity with 17 projects including seven in Australia either under construction or on the verge of groundbreaking.
“Within a few years, these projects will come onstream, adding new production capacity of 132 mtpa. Furthermore, a massive amount of capacity is being promoted for final investment decision in many parts of the world, including in North America, Africa and Russia,” he said.
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