Japan mulls continuing upstream oil, gas asset hunt

Japan is considering continuing to seek additional upstream oil and gas assets overseas despite a growing global shift away from fossil fuels, as the resource-poor country still strives to boost its energy security.

The trade and industry ministry (Meti) today proposed at a panel of experts to raise a target ratio of its own oil and gas output against the country's total demand during 2030-50 above the existing 2030 target of a more than 40pc equity-output ratio. Meti now expects the equity-output ratio to top 40pc by 2025 following the government and private sector's upstream investments in recent years despite a gradual fall in the country's oil and gas requirements.

Japan's oil and gas output hit a record 1.746mn b/d of oil equivalent (boe/d) during the April 2019-March 2020 fiscal year, lifting the equity-output ratio to a record 34.7pc. The country's crude and LNG imports totalled 3mn b/d and 77mn t respectively in 2019-20, bringing combined demand for the year to around 5mn boe/d.

"It is risky for a resource-poor country like Japan to immediately give up fossil fuels, including oil and gas, when there is a significant uncertainty about technology innovations to become carbon neutral by 2050," Meti said.

The country's oil and gas output is projected to fall to 582,000 boe/d in 2050 without additional upstream investment. Meti said the equity-output ratio is expected to drop to 21pc in 2050 after falling below 40pc by 2033 and reaching 32pc in 2040. An expected fall in oil and gas output is expected to outpace a projected drop in demand after 2030 without additional upstream asset acquisitions, it added.

LNG is also expected to play an important role as a transition energy to ensure stable power supplies, at a time when Japan is increasing its efforts to boost renewable power output in the run-up to achieve its 2050 decarbonisation goal, Meti added. It earlier unveiled a tentative 2050 power portfolio target to generate up to 40pc of total power output from nuclear and thermal fuels combined with carbon capture and storage.

Meti is planning to continue the panel discussion before putting together a detailed policy direction during April-May. It is also considering whether to set a volume target for the country's future oil and gas output in addition to the target equity-output ratio. Japan's energy policy is due for a revision later this year.

By Rieko Suda