Report Published: "Japan Oil & Gas Report Q2 2014"

From: Fast Market Research, Inc.
Published: Fri Feb 07 2014

Japan's consumption of imported oil and natural gas has increased as a result of nuclear power generation losses in the wake of the 2011 earthquake and tsunami. However, liquefied natural gas (LNG) consumption appears to have hit an upper limit as gas power is running near maximum capacity, while demand for expensive oil wanes. We expect some nuclear power will return to service in 2014 though it will be a slow and gradual process leaving Japan with significant long-term fuel import costs. As a result Japan is looking to move away from oil-indexed LNG, and is showing the most interest in North America's LNG projects.

The main trends and developments we highlight for Japan's oil and gas sector are:

* Liquefied natural gas (LNG) imports appear to have hit an upper limit in terms of usage and cost. 2012 was a record year with Japan importing 118.75bn cubic metres (bcm); however, gas power generation is running at high capacity and LNG imports for 2013 are expected to be less. The expectation of nuclear restarts in 2014 could further ease high LNG import requirements, though oil-fired power generation will be the first to give way. Gas consumption is estimated to total 121.47bcm for 2013 and will remain relatively flat to 2023 in anticipation of greater efficiencies and nuclear output meeting energy demand growth.
* The refining sector is expected to take a hit with over 400,000 barrels per day (b/d) of distillation capacity coming offline before March 2014 when the refining efficiency law enters into force. This will cut Japan's refining capacity to just under 4mn b/d, down around 1mn b/d from early 2000.
* Due to the reduction in refining capacity, Japanese refiners have already begun reducing volumes on annual crude import contracts. Due to Iran currently remaining under sanctions, the country is likely to take the brunt of reduced imports.
* Oil consumption is in a negative trend, though is expected to remain somewhat flat over the forecast. Oil consumption is estimated at 4.61mn b/d in 2013, falling to 4.37mn b/d in 2018, and further to 4.16mn b/d in 2023.
* In April 2013, Japan launched its first exploration efforts in 10 years. Exploratory wells targeting methane hydrates in a field offshore the island of Sado successfully produced gas in a test phase. Further exploration and testing will take place over the coming years, but if commercial production is economically achievable, methane hydrates could have a significant impact on production towards the end of our forecast period.
* Japan Petroleum was recently able to extract shale oil from a deposit in Akita prefecture, a first for Japan. However, deposits at the Ayukawa and neighbouring gas fields are estimated at just 5mn barrels (bbl), or approximately one day's worth of oil consumption for Japan, underscoring the country's negligible domestic oil resources and its dependence on imports.

Full Report Details at

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