Japan to cut oil dependency to 40% of energy needs by 2030: METI

Tokyo (Platts)--23Mar2006

Japan intends to cut its dependency on oil by 10% from the current
level to 40% of its total energy needs by 2030 through measures such as
encouraging the automobile industry to cut oil use, an official at the
Ministry of Economy, Trade and Industry said Thursday.
Japan currently depends on oil to meet 50% of its total energy needs,
consuming 4.2 million b/d in 2005. With no oil reserves of its own it has to
import every barrel, with 90% coming from the Middle East last year.
"We hope to reduce the country's oil dependency by encouraging the
automobile industry to reduce its oil by dependency by 20% from the current
100% by 2030," the METI official said. "We consider encouraging the automobile
industry to increase the use of ETBE or ethanol-blended gasoline as one of the
tactics to reduce its oil dependency," the official said.
ETBE, or ethyl tertiary butyl ether, is an oxygenated fuel than can be
blended with gasoline to make gasoline burn more cleanly and improve overall
air quality. ETBE is produced by mixing ethanol and isobutylene, but it
eliminates many of the historical impediments to the greater use of ethanol
such as increased volatility of gasoline. ETBE can therefore be mixed into
gasoline at the refinery itself, unlike ethanol, which has to be blended in at
the point of sale.

BOOSTING ETBE USE IN GASOLINE
The Petroleum Association of Japan, which groups domestic refiners,
decided earlier this year to consider using ETBE as a blending component for
gasoline from 2010.
The association has called on the refiners to adopt ethanol-blended
gasoline or gasohol in the 2010 fiscal year, starting with 20% of their total
gasoline sales. Japan's gasoline demand stood at 61 billion liters (about 1.05
million b/d) in 2005, according to METI figures.
Japan's intention to cut its oil dependency comes as part of the its new
energy strategy, scheduled to be finalized by the end of May. An advisory
board at METI's Natural Resources and Energy Agency outlined an interim report
of the new strategy this week.
This included a move to encourage the oil industry to boost its share of
direct crude procurement from upstream developments to 40% from the current
level of just 15% of the country's total imports.
"We intend to strengthen financial schemes to encourage Japanese upstream
players easier to undertake their drilling and development projects," the METI
official said. "We also intend to strengthen relations with producers at
government level to strengthen stable sources of oil and natural gas," he
added.
The country also intends to strengthen its framework for contingency
measures such as releasing national or private stocks in the case of an energy
crisis, the source added.

TO BUILD REFINED PRODUCT STOCKPILES
As part of this reorganization, METI is looking into building a national
refined products stockpile and has begun discussing the plan in the oil policy
committee, a METI official said earlier this week. Japan currently holds only
crude in strategic storage.
"We have started looking into the new things we need to do as we draw
lessons from the IEA's cooperative stock release last September," the official
said, referring to the International Energy Agency's decision to release
stocks to ease shortages in the wake of hurricanes Katrina and Rita last year.
"We came to feel that the government also needs to stockpile refined
products in case we are faced with an emergency shortage," he said.
Japan released 7.32 million barrels from private stocks in response to a
request from the IEA to release a total of 63 million barrels of crude and
products last September to ease disruptions caused to US Gulf of Mexico
production and refining operations by the hurricanes.
--Takeo Kumagai, takeo_kumagai@platts.com

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