PORTLAND MARKET REPORT
JULY IN VIEW
AGAINST THE BACKDROP OF THE TOKYO OLYMPICS , WE CONSIDER THE COMPLEXITY OF ENERGY IN JAPAN
It ’ s been an occasional tradition of this report to try to link major sporting events to fuel markets ! So it was that we looked at London in 2012 ( Olympics ), Russia both in 2014 ( Winter Olympics ) and 2018 ( World Cup ), Brazil , also twice , in 2014 and 2016 ( World Cup and Olympics ) and South Korea in 2018 ( Winter Olympics ). With no spectators and an understandable lack of fanfare , most of us seem to have forgotten that Tokyo is hosting this year ’ s ( delayed ) Olympics – but we won ’ t let that stop us writing another wholly useless report on the world of oil and energy and how it plays out in Japan !
Just like the weirdest Olympic event ever ( the cycling Keirin – originally from Japan and the one with the guy on an electric bike at the front ), energy across the Japanese archipelago is a complex and tactical affair . Much of this stems from the fact that the country has virtually zero mineral raw materials . It has next to no coal reserves , produces no oil and has a tiny number of operating gas fields . For the 3rd biggest economy on earth , that is an unusual position to be in and has inevitably required careful energy planning , along with the strategic development of strong international relationships to mitigate such a large reliance on imported energy .
“ ENERGY ACROSS THE JAPANESE ARCHIPELAGO IS A COMPLEX AND TACTICAL AFFAIR .”
Japan imports 3m barrels of oil per day ( bpd ), which is around 3 % of world consumption and makes it the 4th largest oil importer on the planet ( after USA , China and India ). It ’ s reliance on Middle Eastern oil is absolute ( 90 % of imports ), with the first trading relationship agreed and formulated with Saudi Arabia as far back as 1955 . This complete reliance on oil imports is replicated with gas – the other “ blue riband ” energy event . Again , Japan has no material indigenous production , so 85m tonnes of Liquified Natural Gas has to be imported each year . 20 % of this volume
22 Fuel Oil News | August 2021 comes from the Middle East , but this time it is Australia in the gold medal position , with a 40 % share of the Japanese market . As an island state with no inter-connecting pipelines , all Japanese gas has to be imported by ship , making the country the largest global importer of natural gas in the world . It is also a key factor behind Japan ’ s Olympic-standard mercantile fleet , with over 1,000 Japanese flagged oil , gas and chemical tankers plying the world ’ s seas ...
The strategic thinking behind having such a strong shipping fleet is no doubt along the lines of “ if you can ’ t control the product , you better control the transportation ” and a similar line of thought has been applied to Japan ’ s energy manufacturing sector . The country may be short of oil , but it certainly makes up for it when it comes to the processing of the stuff , with 21 refineries and a total daily throughput capacity of 3.5m bpd ( circa 550m litres per day ). As a comparison the UK , with roughly half the population of Japan ( 65m Brits to Japan ’ s 125m ), has only 6 refineries and a combined capacity of circa 1m bpd . A further difference in infrastructure scale can be observed in the number of petrol stations in both countries ; whilst both markets have experienced a significant contraction in numbers , Japan still has 29,000 petrol forecourts compared to the UK ’ s 8,500 .
So far , so ( old school ) fuel , but it should also be noted that Japan now has far more automotive electric charge points ( just shy of 50,000 ) than it does petrol stations . This aggressive electrification of the transport fleet is largely the result of strategic shifts made by the country ’ s leading car manufacturers ( Toyota , Nissan , Honda ), rather than any green legislation emanating from the Japanese government . In fact in most environmental disciplines , Japan lags well behind European
and American states . The country still relies on ( imported ) coal for a quarter of its electricity and a further 40 % comes from a combination of Natural Gas and Oil . Renewables only account for 10 % of the energy mix , whilst Nuclear is now a shadow of the pre-Fukishima period , when it contributed over a third of the nation ’ s electric power ( via 50 nuclear generators ). That figure is now down to 3 % from the country ’ s four remaining generators .
“ NO PLACE FOR JAPAN ON THE GREEN PODIUM JUST YET .”
No place for Japan on the green podium just yet then , although along with many other developed nations , Japan has committed to “ Net Zero ” by 2050 . Their Green Growth strategy has identified 12 sectors that can contribute to this decarbonisation agenda and these include renewable energies , hydrogen production and carbon capture / recycling . Even more fundamental however is the inclusion and significant focus on the recovery of the nuclear industry , to help meet low carbon targets . The logic of including this zero emission energy source is clear and Portland feels it will be a blueprint for other developed nations , as they grapple with the practical problems of decarbonising fossil fuel dependent economies . Just like Seb Coe prior to the 1984 Los Angeles Olympics , nuclear has become the forgotten man of the energy sector – written off , criticised and unloved . Coe bounced back at the LA Coliseum in the 1500m final and comfortably took gold – could the nuclear industry do the same and defy the doubters ? We ’ ll see , but in the meantime enjoy the Olympics and remember that the guy on the electric bike with the rucksack ( why ?!) cannot win a medal at the Keirin …!
For more pricing information , see page 26
Portland www . stabilityfromvolatility . co . uk