GAS & LNG Market of JAPAN - Coursework Example

 Gas and LNG Market in Japan Introduction into Japans’ Gas and LNG Market During the Second World War Japan’s power infrastructure got damaged though after the war it did catch up on electricity production and at an accelerated rate. Presently, there have been further developments in the country’s power industry whereby the country has been transiting into use of gas and liquefied natural gas through nuclear power (Erselcuk 1947: 287). This has been contributed by experiences the country has been having from earthquakes and tsunamis. Japan is currently retreating from nuclear power to liquid natural gas especially following its last year’s earthquake disaster which led to explosions and meltdowns. Japan is one of the world’s largest consumers of natural gas and it has 0.01% of the globe’s total natural gas reserves. A number of regulations have been formulated to protect public interests as far as Japan’s energy industry is concerned with particular interests taken in its gas and liquefied natural gas (Beder 2008). Supply and demand of liquefied natural gas has also been enhanced and not embracing duplication of the already existing capacity while at the same time encouraging competition for liquefied natural gas power utilities in its market. However, it has to import gas since it is presently producing less than 4% of the total gas uptake. Gas Terminals Japan presently has 28 gas terminals and some domestic resources for gas fuel. These reserves are however limited hence the country’s reliance on importation of liquefied natural gas. The country lacks connections of oversea pipeline though it has got a fragmented transmission pipeline through a national network. Through these terminals imported gas is contained and transmission is mandated to private companies such as Osaka Gas, Tokyo Gas and Toho Gas. Current Gas and LNG Market in Japan Energy industry in Japan is dominated by private companies. The country’s electric power generating companies have topped up imports of liquid natural gas in recently. These imports, as well as industrial shutdowns accruing from earthquake and tsunamis helped the country to stabilize to a greater extent in terms of power efficiency. There have also been great increases in imports of liquid natural gas and the country is prospecting to explore more new sources and supplies for the same. OECD (2004) points out on a challenge of “getting natural gas to Japan whereby energy companies must supercool the fuel and convert it to liquid form, then carry it on tankers across the ocean, where it must be converted back into natural gas”. Japan forms the largest carrier of natural gas globally by capacity and was, until upending of its nuclear power industry by earthquakes, the biggest importer of liquid gas. They country also has wholesale gas and liquefied natural gas reserves though this is supplemented by a number of electricity generators. Hori (2001) observes that a number of industrial users are also generating their own electricity so as to help them in cutting power costs. Furthermore, there are many projects for natural gas supply most of which are directed to specific customers some of these include companies which supply buildings or households with electricity, municipalities which feed their own departments and companies which supply other companies with electricity following mutual relationships between them. Gas and Liquefied Natural Gas Importation The country currently spends more on imports than what it generates from exports in terms of energy outsourcing. Most utilities in Japan have increased their fuel consumption and Japan has therefore been compelled to raise its use of liquefied natural gas, as well as consider coal as a substitute energy source. However, importation of gas is very costly for the country. It has got an increasing need for liquid natural gas, a move that is particularly contributed by its decision to terminate its use of nuclear power. Several Japanese companies are purchasing natural gas rights from different countries across the globe with focus put on the country’s home market. Meltdowns and explosions that arose from nuclear plant disasters led to closure of reactors in the country hence they have since kept offline. Out of the country’s 54 nuclear reactors, only 3 were left operating. Farrell (2008) notes that “Though it is a fossil fuel that contributes to greenhouse gases, Japanese users see natural gas as cleaner than coal, less expensive than oil, and more readily available than sun or wind power”. Up to recent years nuclear power has been the country’s main electric power supply. Decline in the country’s use of nuclear power has rendered it experience urgent need for cheaper fuel. With positive responses being received from prospected liquid natural gas imports such as from Mozambique, Japan is placed well for diversification of its liquid natural gas sources. A number of developments have been put in place by Japanese government which focuses mainly on gas industry’s production investments, growth and improvement of liquefied natural gas market, worldwide development of unconventional liquefied gas, rising costs on operations in the gas industry and exploration of increased risks in the country’s liquefied natural gas industry. The country poses as the world’s emerging largest importer of liquefied natural gas. Growth and Official Forecasts of Gas and Liquefied Natural Gas Industry in Japan Japan’s growth in terms of gas and liquefied natural gas only efficient when it gains its efficiency through involvement of importation alongside promoting high competition in the industry (Yoshimatsu 2002). This kind of growth in Japan’s energy sector has seen investment returns increase especially due to higher charges on services. Permanent employment on full-time bases has been encouraged thereby replacing temporary work and part-time jobs in the sector. This follows the forecasts on enhancing savings through higher pay rates along with enhanced working conditions for employees therefore, ending trends whereby there has been redundancy in employment of thousands of electricity workers. Asano (2006: 2485) notes that Japan still remains focused on seeing all of its households and businesses both small and big gain access to deregulated supply of retail liquefied natural gas power. Retail prices have risen in most places where gas and liquefied natural gas deregulation has been introduced in the country. This has mostly been felt by small businesses and households and the country is forecasting towards ascertaining that fuel is accessible to all. There is also focused on putting energy exchange programs for so as to control existence of some large companies in the power market from manipulations which have been on the rise. However, these efforts are deemed accessible if and only if excess gas and liquefied natural gas power supply is present. This implies that the Japanese government has to promote and encourage investments which are aligned to gas terminals with substantial deregulations. Besides, there are concerns regarding high costs which have brought emphasis to be placed on reliability and security of energy both which need to be maintained at higher levels. These high costs are attributed to Japan’s deregulation of its energy sector which has lead to increased disputes and sensitivity in a number of areas namely environmental protection and conservation, energy reliability, energy security and efficiency of economic objectives (Erselcuk 1947: 289). The country therefore is looking into approaches to save capital investment in its electricity energy sector which has been at the realms of falling. Japan’s Potential for Renewable Energy Resources to Boost Gas and LNG Reserves To help boost its’ gas and liquefied natural gas, Japan has been focused on renewable energy sources, the main one of which is hydropower energy. Besides, Japan is well endowed with renewable natural energy sources which it can harness into its energy industry. These are renewable and have the possibility of being used without getting diminished. There are prospects into harnessing tidal energy and energy from waves which are a reliable source of energy for Japan (OECD 2004). The country has a great potential to tap into these through renewable technologies even though they are not evenly distributed across the country’s sea waters. This can be ensured by way of utilizing waves and tidal head at the country’s lagoons which run along its coastline. Geothermal energy resources and wind energy are also renewable and form a crucial part of Japan’s potential renewable energy components for the country. These along with solar energy can be harnessed through a number of mediums (Asano 2006: 2492). Ocean thermal energy conversion is being employed as well in some cases in the country to help boost its gas and liquefied natural gas reserves. This is tapped from the seas by applying differences in deep and surface seawater temperatures. Challenges Faced by Japan’s Gas and Energy Industry Japan has been faced with a number of challenges which have potential of affecting its energy industry and evolution of its gas and liquefied natural gas market. One of the greatest challenges is earthquake trends in Japan which cause destructions to the country’s gas terminal infrastructures thereby posing the greatest challenge not only to the country’s energy sector but also to the its engineering community (Beder 2008). Such catastrophic challenges have been prominent in the country and it is always hoped that loss of lives is not part of outcomes that come with it. Earthquakes have been destructive in massive magnitude not only to Japan’s national gas grid but also to its gas terminals. The country’s nuclear plants have not been spared either by earthquake. One of the end results is that the country has been experiencing radiation leakages from its nuclear power plants following damages accruing form earthquakes. Besides earthquakes are tsunamis waves which mostly accompany earthquakes. These challenges have of serious reflection about the country’s future in terms of energy with particular reference to nuclear energy. Damages accruing from these nuclear plants are as a result of natural influences hence no human ability can manage to control them let alone engineers and designers to have the ability or knowledge to handle them (Asano 2006: 2492). The Japanese have been compelled to take heed of such events and occurrences or better still take appropriate measures to keep themselves alert of them. This implies that Japan’s future prospects for nuclear energy development will have to integrate choices and substitute technologies for nuclear power. Another challenge that the country is faced with is that the country relies highly on imported liquefied natural gas power which is produced in other countries. This has kept the country’s energy consumption so high in terms of costs. Japan’s energy industry is presently under gradual deregulation so with an aim of minimizing its high power costs or prices. The Japanese government is also keen on promoting and encouraging use of fossil energy materials such as coal. It looks forward to retreat completely from nuclear energy so as to make sure that its nuclear energy cycle is closed therefore, cut on its dependence on imported nuclear or atomic energy sources (Hori 2001). Furthermore, the country has not been able to find it favourable for investment initiatives especially with regard to nuclear power generation. More to this, pressures from competing companies arising from deregulations have not been in an able position to encourage safety and dependence on this type of energy. This is particularly attributed to the fact that Japanese people do not take such issues for granted being that they have in the past experienced a number of nuclear accidents. Gas and liquefied natural gas industry in Japan is also faced with the challenge of controversial technologies which are at the same time unproved. However, Beder (2008) points out that this has potential of being a technology in the lead. The trend means that there has been no remarkable progress in the industry. The government’s level of response has also been slow. Therefore a greater challenge is deemed to occur in that there is possibility of having risks of redundancy. This follows the fact that gas and liquefied natural gas industry has been so much politicized yet it should not be based on political bases. The industry is thus faced with the challenge of getting itself back into a free market that is void of political influences. If the industry is to be regulated through political influence, then overall business sector in the country will be affected. Policy Issues of Japan’s Gas and Liquefied Natural Gas Industry The main policy area of concern in Japan’s gas and liquefied natural gas industry is deregulation process which has been quite gradual. Proposals on amendments to the country’s electricity legislation have been enacted to allow for purchase of electricity from international sources (Hori 2001). This has been made to encompass internal generators for its electricity generation companies so as to improve levels of gas and liquefied natural gas reserves for the country which require independent power producers. Through a number of relevant ministries in Japan, responsibility of formulating Japan’s policy for energy has been focused on. These have been mandated to ascertain there is rational development of energy resources, acquisition of reliable energy supplies in the country, encouragement of efficient use of energy resources and regulation of gas and liquefied natural gas industry alongside national energy industry as a whole (Yoshimatsu 2002). Agencies have been set up to take the responsibility of ensuring that there is safety for industrial activities and energy facilities pertaining to nuclear energy. At the same time international energy policies have been formulated too. Top decisions regarding Japan’s energy generation, development and consumption have been given priority thereby formulating policies to guide in them especially in areas where stakeholders are involved. A scheme of tender competitiveness had been introduced upon approval of its conditions which were deemed to be relevant in facilitating energy regulation process in the country (Asano 2006: 2492). This was viewed as having potential that would enable the country’s gas and liquefied natural gas market to rise to peak levels as far as demands as concerned. It was not to involve setting up of any new gas and liquefied natural gas terminals for capital intensives. However, it was to introduce competition into the entire energy market in terms of wholesale. Besides, this kind of policy has had in mind issues to do with electricity utilities, as well as how they will impact on processes for seeking tenders for putting up new gas and liquefied natural gas terminals from a range of companies and firms which are also open to foreign firms. Targets of the Gas and Liquefied Natural Gas Market in Japan The country keeps on with its prospects to enhance its gas and liquefied natural gas efficiency as part of its core pillars as far as its energy regulations are concerned. The country targets achieving and improving its economy through enhanced and intensified energy supply with particular regard to electricity. Even though it has experienced leveled improvements at some point in time, its government aims at improving energy uptake by 30% for every unit of gross domestic product (GDP) by the year 2030. This is in comparison to the year 2003. There is also an effective framework for the country which is aimed at promoting the use of energy sources which are not of fossil nature, as well as promoting use of fossilized energy sources through suppliers of energy (Yoshimatsu 2002). Another aspect that is more or less related to this is the fact that the government is targeting introduction and development of alternative energy sources and materials. Regulatory approaches have also been put in place to ensure that that country acquires a steady supply of electricity. This has been one of its targets and it is intended to be achieved through reviews of present policies guiding alternative energy as well as facilitation of employment of non fossil energy materials and sources (Beder 2008). This is also aimed at achieving its target of effective application fossilized energy sources and materials through formulation of bills. A number of times the country has experienced blackouts following its low reserves in electricity generation capacity (Yoshimatsu 2002). This has most of the time due to vicious incentives of its market schemes which have contributed to higher profits for private companies which source gas and liquefied natural gas. Such have been common especially during power shortages. The government has therefore been targeting phasing out such trends so as to help encourage investment in the latest gas and liquefied natural gas production capacity. This comes along its target to discourage and control holding back of electricity especially during peak periods when electricity demand is high so as to get energy prices go up. Another target that has been of great focus is reducing of public debts. This has been focused on through plans for privatizing gas and liquefied natural gas production companies. This is deemed to have potential of not only reducing public debts but also raising funds from sales on energy assets which is mostly in the form of government’s bonus revenue. Conversely, the government only benefits from long-term savings accrued from interest refunds from minimized budget deficits (Asano 2006: 2491). This is true with taxes being repaid particularly from private companies thereby surpassing lost dividends. Besides, there is a concern of additional costs contributed by failures in gas and liquefied natural gas market, as well as power exploitations by private gas companies. Conclusions Japan’s gas and liquefied natural gas industry and maker has been into a number of evolutions and is still deemed to keep evolving as new developments are realized. These will enhance the country’s energy sector in terms of gas and liquefied natural gas production. However, private companies are seen to have the greater share of gas and liquefied natural gas industry in the country. Most of these private companies have been freed from obligations relating to social concerns therefore, making them capable of undertaking beneficial operations and initiatives. The government on the other hand has been mandated with the responsibility of regulating the industry while also taking care of unbeneficial supply of gas fuels for instance through promotion of equitable access to gas energy and environmental conservation and protection strategies. The country is also efficiently supplied with gas and liquefied natural gas amid several challenges it has been faced with and the policies guiding its energy industry have been relevant in that they gave encouraged improvement in the industry. References List Asano, H. (November 2006). Regulatory reform of the electricity industry in Japan: What is the next step of deregulation? Energy Policy, Volume 34, Issue 16, p. 2491-2497  Beder, S. (2006). New conclusion for the Japanese edition of Power Play: The Fight to Control the World’s Electricity, Soshisha Ltd, Japan Erselcuk, M. E. (May, 1947). Electricity in Japan, The Far Eastern Quarterly, Association for Asian Studies; Vol. 6, No. 3, p. 283-293 Farrell, R. (2008). Internationalization of Japanese business, Cheltenham: Elgar Hori, T. (2001). Creating the wholesale market for electricity in Japan: what should Japan learn from major markets in the United States and Europe? Cambridge, Mass.: Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research Organization for Economic Co-operation and Development. (2004). Japan – OECD Economic surveys 2003, Paris: OECD Yoshimatsu, H. (Autumn, 2002). Japan and Industrial Adjustment in Asia: Overproduction Problems in the Synthetic Fibre Industry, Pacific Affairs, Pacific Affairs, University of British Columbia; Vol. 75, No. 3, p. 377-398. Read More