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Japan Oil and Gas Report Q1 2012
Business Monitor International, Dec 2011, Pages: 70
Over the near term, Japan's consumption of imported oil and natural gas will remain at a heightened level as a result of nuclear power generation losses in the wake of the 2011 earthquake and tsunami. Over the longer-term, a reassessment of energy strategy means the role of nuclear will be reduced and, inevitably, gas in particular will have to make up part of the shortfall. This suggests that Japan will become a still bigger player in global LNG purchasing.
The main trends and developments we highlight for Japan's Oil and Gas sector are:
- Japanese oil consumption has been undermined by sluggish economic activity, fuel efficiency improvements and inter-fuel substitution in favour of gas and nuclear power. However, BMI's data indicate only slightly lower consumption in 2011, at around 4.41mn barrels per day (b/d), which is higher than earlier forecasts made after the earthquake and subsequent tsunami in March 2011. This has resulted in greatly reduced nuclear generation and a significant upturn in oil- and gas-fired power generation to compensate. By 2016, the country is expected to be consuming 4.46mn b/d of oil.
- The country's nuclear sector, which accounted for 13% of primary energy demand in 2009, has been virtually shut down following the earthquake. The country will turn to other fuels, notably oil, coal and gas in the form of imported liquefied natural gas (LNG) to fill this gap. BMI sees LNG in particular playing a crucial role, and rising import requirements have the potential to reshape the Pacific Basin LNG market.
- Japan's August 2011 imports of LNG reached 7.55mn tonnes, an increase of 18.2% year-on-year (y-oy). LNG imports rose owing to the lower operating rates at nuclear power plants.
- BMI has upwardly revised the gas consumption estimates for 2011, 2012 and 2013 following the earthquake and tsunami. Gas consumption is expceted to have risen to 106.7bn cubic metres (bcm) in 2011 and it is expected to rise steadily towards 112bcm by 2015/16 – largely in the form of imported LNG.
- The crude oil import requirement is around 4.40mn b/d, and may remain around this level as a shortage of nuclear capacity leads to higher oil use in power generation. The 2016 crude oil import bill should be US$151.2bn. The gas import cost would be US$50.7bn, taking Japan's combined 2016 oil and gas import bill to US$201.8bn.
At time of writing, BMI assumes an OPEC basket oil price for 2011 of US$101.90 per barrel (bbl), falling to US$99.40/bbl in 2012. Global GDP in 2011 is forecast at 3.2%, down from 4.3% in 2010 reflecting slowing growth in China, a faltering recovery in the US and a worsening eurozone debt crisis. For 2012, growth is put at 3.6%.
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