Japan Looks to Canada for Lower Energy Risk
Plans being jointly studied by major companies such as Mitsubishi Corp., Tokyo Gas Co. and Osaka Gas Co. to build a large liquefied natural gas plant on the Pacific coast of Canada to tap shale gas are aimed at ensuring a stable supply of natural gas, global demand for which is rising sharply.
Reflecting moves to lessen dependence on nuclear-based electric power, shale gas has become an increasingly important source of energy worldwide. Production has been growing especially fast in North America.
It is extremely important for Japan to expand the regions from which it procures natural gas beyond areas with high geopolitical risk, such as the Middle East and Russia.
In its initial stage in August last year, the shale gas development project in British Columbia, northwestern Canada, was undertaken as a joint venture between two companies: Mitsubishi Corp. and Penn West Exploration, a major Canadian oil and natural gas company.
In the wake of higher anxiety over energy supplies following the March 11 Great East Japan Earthquake, however, the scale of the project has been expanded significantly. It is now a joint private-public undertaking also involving Chubu Electric Power Co., Tokyo Gas and Osaka Gas, as well as the governmental Japan Oil, Gas and Metals National Corporation.
All this is taking place against the backdrop of increasing uncertainty regarding the future of Japan's energy situation, as many of the nation's nuclear power plants have been suspended due to the crisis at Tokyo Electric Power Co.'s Fukushima No. 1 nuclear power plant.
Because of the drastic changes in the domestic energy situation, it has become urgent to boost thermal power generation to replace nuclear power generation, and expectations have risen that the development in Canada will become Japan's new main source of natural gas.
Transport by sea from Canada's Pacific coast to Japan takes 10 to 12 days, about half the 20 or so days needed to reach this nation from the Middle East.
The low geopolitical risk in North America is also a favorable element.
Canada has so far exported natural gas mainly to the United States. However, the United States has recently begun to reduce its intake of Canadian-produced gas, as its own domestic production has risen sharply.
The project is expected to aid Canada as well, securing for it Japan, one of the world's largest energy consumers, as a stable purchaser of Canadian natural gas.
Most promising N-alternative
LNG, when burned, emits considerably less carbon dioxide than crude oil and coal. As a result, LNG has been deemed the most promising alternative to energy generated from nuclear power.
Japan's LNG imports in fiscal 2010 stood at 70.56 million tons, up 30 percent from 54.1 million tons in fiscal 2000.
A one-month delay in resuming the operations of nuclear reactors currently halted for regular safety inspections would necessitate increasing LNG consumption for power generation by about 30 percent from fiscal 2010, according to the Institute of Energy Economics, Japan.
There is no sign that the currently suspended reactors will be restarted soon.
Increasing LNG-fueled thermal power generation is the only realistic option to prevent economic activity from being hampered because of electricity shortages
Import prices of LNG have dropped markedly since the global financial crisis that followed the 2008 Lehman Brothers bankruptcy, while LNG output in the United States and other countries with oil-rich shale has continued to soar.
LNG imports by China and other emerging economies, however, have risen significantly. Global LNG demand, which stood at 182 million tons in 2009, is expected to more than double to 447 million tons by 2035.
In addition, the LNG supply-demand balance has been rapidly destabilizing since the Fukushima nuclear crisis and subsequent moves in Germany and other countries to put an end to nuclear power.
Spot LNG prices for shipments to Asia have risen about 30 percent compared to before the March 11 earthquake and tsunami.
Prices of LNG produced in Canada will depend on the global market situation at the time Japan purchases the gas. However, the latest project will surely help ensure Japan's energy security, as it would go a long way toward satisfying the nation's quantitative requirements for LNG.
Source: Daily Yomiuri Online