Dependant on foreign sources for 96% (87% when including nuclear power) of its primary energy needs and practically 100% of its oil and gas supply, Japan is in a unique position. Rising demand for energy resources and increasing volatility in their supply are contributing greatly to Japan’s concerns. Only natural, then, that Japan should seek to secure its own energy interests. But how realistic is this in today’s world?
A major target of Japan’s May 2006 New National Energy Strategy (NES) is to have the ratio of oil developed by Japanese upstream firms ("Hinomaru oil") increase to 40% of Japan’s oil imports by 2030, up from around 15% in 2005. Japanese oil companies are scrambling to meet this seemingly unobtainable target, coquetting potential partners in Africa, Russia, Central Asia and the Gulf. Just how difficult attaining this objective is can be seen in the failure of the Japanese-owned Arabian Oil Company to renew concessions in the Neutral Zone (also known as “Divided Zone”) between Kuwait and Saudi Arabia in 2000 and 2003. The Azadegan oil field in Iran, where Japanese oil company Inpex’s 75% stake was slashed to 10% by the Iranians in October 2006 and eventually frozen, is another case in point. Meanwhile, voices calling for a boycott of Sudanese oil are getting louder and Japan’s projects on the island of Sakhalin have been undergoing some serious turbulence. The news is not all bleak, however. One major success was scored in October 2005 when Japanese oil firms beat their international competitors in bidding for exploration and development rights in six Libyan oilfields; this was the first oil-exploration concession ever given to Japanese firms in Libya.
Another goal of the NES is to lessen Japan’s dependency on Middle Eastern oil. Here too some progress is being booked, with 84.3% of oil imports originating from the Middle East in November 2007, compared to 90.3% in September 2006. However, the figure has been edging back up in the past few months to 86.7% in February 2008.
One way in which Japan is seeking to realize the goals of the NES is by increasing government involvement in the acquisition of energy resources. To offset the advantages enjoyed by state-sponsored Chinese oil firms, the Japanese government is now seeking to increase subsidies (raising the upper limit of its funding to 75% from the previous 50%) to Japanese oil firms such as JOGMEC – which is slowly becoming a carbon copy of the old Japan National Oil Company. Additional assistance is to come in the form of more favorable loans and investment guarantees. In other words, there is little to be left of the free market policies and non interference from the government that former Prime Minister Junichiro Koizumi’s liberalization policies set out to engraft.
Despite being the world’s second largest net importer of oil, the third largest consumer of oil, and the largest importer of Liquefied Natural Gas (LNG), Japan’s demand will continue to decline relative to that of emerging markets such as India and China. With the relative decline of Japanese demand come decreases in Japan’s purchasing power, further undermining its position in the international energy market.
This leaves Japan with two options, namely seeking alternative sources of energy and improving energy efficiency. It is in both of these areas that Japan has booked its most impressive results. Energy conservation and environmental protection have improved significantly, leaving Japan with one of the lowest energy intensity levels among the advanced OECD economies. Similarly, Japan has been able to move considerably in the direction of nuclear and LNG derived power, reducing its dependency on oil. The price, of course, has been increasing dependency on gas.
A major target of Japan’s May 2006 New National Energy Strategy (NES) is to have the ratio of oil developed by Japanese upstream firms ("Hinomaru oil") increase to 40% of Japan’s oil imports by 2030, up from around 15% in 2005. Japanese oil companies are scrambling to meet this seemingly unobtainable target, coquetting potential partners in Africa, Russia, Central Asia and the Gulf. Just how difficult attaining this objective is can be seen in the failure of the Japanese-owned Arabian Oil Company to renew concessions in the Neutral Zone (also known as “Divided Zone”) between Kuwait and Saudi Arabia in 2000 and 2003. The Azadegan oil field in Iran, where Japanese oil company Inpex’s 75% stake was slashed to 10% by the Iranians in October 2006 and eventually frozen, is another case in point. Meanwhile, voices calling for a boycott of Sudanese oil are getting louder and Japan’s projects on the island of Sakhalin have been undergoing some serious turbulence. The news is not all bleak, however. One major success was scored in October 2005 when Japanese oil firms beat their international competitors in bidding for exploration and development rights in six Libyan oilfields; this was the first oil-exploration concession ever given to Japanese firms in Libya.
Another goal of the NES is to lessen Japan’s dependency on Middle Eastern oil. Here too some progress is being booked, with 84.3% of oil imports originating from the Middle East in November 2007, compared to 90.3% in September 2006. However, the figure has been edging back up in the past few months to 86.7% in February 2008.
One way in which Japan is seeking to realize the goals of the NES is by increasing government involvement in the acquisition of energy resources. To offset the advantages enjoyed by state-sponsored Chinese oil firms, the Japanese government is now seeking to increase subsidies (raising the upper limit of its funding to 75% from the previous 50%) to Japanese oil firms such as JOGMEC – which is slowly becoming a carbon copy of the old Japan National Oil Company. Additional assistance is to come in the form of more favorable loans and investment guarantees. In other words, there is little to be left of the free market policies and non interference from the government that former Prime Minister Junichiro Koizumi’s liberalization policies set out to engraft.
Despite being the world’s second largest net importer of oil, the third largest consumer of oil, and the largest importer of Liquefied Natural Gas (LNG), Japan’s demand will continue to decline relative to that of emerging markets such as India and China. With the relative decline of Japanese demand come decreases in Japan’s purchasing power, further undermining its position in the international energy market.
This leaves Japan with two options, namely seeking alternative sources of energy and improving energy efficiency. It is in both of these areas that Japan has booked its most impressive results. Energy conservation and environmental protection have improved significantly, leaving Japan with one of the lowest energy intensity levels among the advanced OECD economies. Similarly, Japan has been able to move considerably in the direction of nuclear and LNG derived power, reducing its dependency on oil. The price, of course, has been increasing dependency on gas.
1 comment:
I agree with you about these. Well someday Ill create a blog to compete you! lolz.
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