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Friday, Oct. 5, 2012

Shale oil helpful but not key resource

Hope for energy security tempered by expense, difficulty of extraction

Kyodo

Japan Petroleum Exploration Co.'s test extraction of oil from deep underground shale rocks, a first for Japan, has raised hopes of improving energy security in a nation that relies on imports for almost all of its fossil fuel needs.

News photo
Domestic resource: Test-drilling in deep-underground shale rock continues Wednesday in Yurihonjo, Akita Prefecture. KYODO

But newly tapped "unconventional" resources, such as shale oil and shale gas, require complicated methods of extraction that also raise environmental concerns.

Because it also entails relatively high drilling and extraction costs, it doesn't appear likely to become a primary source of energy in Japan, where the need for different resources has grown acute since the Fukushima crisis shut down nuclear reactors across the county.

Oil was confirmed Wednesday at the Ayukawa oil and gas field in mountains in the city of Yurihonjo, Akita Prefecture.

Officials at the company, known as JAPEX, appeared more preoccupied with the challenges of commercialization than feeling the joy of achieving a "first" for Japan.

"This oil is costly, in part because we need to pay heed to the environment," said Keisuke Inoue, the head of the company's Akita mining office who oversaw the test exploration project.

The extraction process required pumping a large volume of hydrochloric acid into rock layers about 1,800 meters deep to dissolve limestone that clogs cracks through which oil can be obtained.

Using acid is deemed an environmental hazard. It must be recovered from underground for neutralizing before it is processed as "industrial waste."

Recently, near tanks for shale oil, workers were busy handling the waste. "Labor costs are higher for this (industrial waste processing) than crude oil exploration," a JAPEX official said.

Compared with conventional fossil fuels, unconventional varieties require extra efforts at development but are known to be abundant.

Unconventional resources are also found in various parts of the world, unlike crude oil, which is heavily concentrated in the Middle East and a relatively small number of other areas.

In the United States, shale gas production has expanded sharply in recent years, thanks to new drilling methods for expanding horizontal holes in rock layers or creating artificial oil conduits by applying water pressure.

But not everything appears to be rosy. Given that these new technologies employ large volumes of water and chemicals, the United States drafted regulations in the wake of concerns over the contamination of underground water in 2011.

Despite such concerns, interest in these unconventional resources is intense due to high crude oil prices that have long stayed at around $100 per barrel.

"It looks like around $70 per barrel is a profitable line," Inoue said. A drop in oil prices will throw cold water on the development of shale oil, he said.

In Japan, there doesn't appear to be substantial deposits of shale oil in many places outside Akita Prefecture. The assumed volume is estimated at less than 10 percent of Japan's annual oil needs.

News photo
Black gold: This shale oil was extracted in Yurihonjo, Akita Prefecture. KYODO

Methane hydrate, on the other hand, is raising hopes among energy officials. The substance, a combination of methane, a main fabric of natural gas, and water, is believed to be rich in reserves in locations with low temperatures and high atmospheric pressure such as the deep seabed in waters around Japan.

While its extraction is thought to require advanced technologies and substantial costs, according to one estimate deposits around Japan are enough to meet the country's natural gas consumption for a whopping 100 years.

Around four hours after shale oil was extracted in Akita, officials from 10 prefectures on the Sea of Japan visited the Ministry of Economy, Trade and Industry to submit their request that the central government promote methane hydrate development.

Kyoto Gov. Keiji Yamada, who was among the officials, expressed his hope for increased interest in developing this new source of energy, while the central government has come up with a strategy to wean the country off nuclear energy by the 2030s.

"The government's new strategy will be a rice cake in a painting if there are no new energy sources," he said, referring to a Japanese proverb illustrating a plan that looks good but may well not be realized.



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