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Friday, Sept. 20, 2002

ENERGY EQUATION

POWER POLICY PALATABILITY

Energy goals, needs, realities not in sync


First of two parts on Japan's energy supply ahead of the 8th International Energy Forum, which starts Saturday in Osaka Staff writer OSAKA -- It was another sweltering summer day in Den Den Town here, with the temperature expected to climb above 30 and humidity at nearly 80 percent.

Many shoppers were complaining about the Southeast Asia-like summers that have become a hallmark of not only Osaka and Tokyo but other Japanese cities in recent years.

Makoto Asai, 47, manager of an electronics goods store, is happy with the heat, however. "Hotter, longer summers mean more sales of air conditioners," he said.

More air conditioners mean more electric power is needed to run them, which, in turn, means higher demand for imported fossil fuels ranging from oil and coal to natural gas, and more nuclear power.

Where the fuel sources will come from, and in what proportion they will be used, will shape Japan's energy future.

According to the Japanese Federation of Electric Power Companies, the burning of fossil fuels and nuclear power accounted for 90 percent of Japan's power output in 2001.

Electric power accounts for 40 percent of Japan's prime energy needs. A look at the nation's total energy requirements shows that oil accounted for 52 percent in 2000, followed by coal at 16 percent, nuclear power at 14 percent, natural gas at 13 percent and the remaining 5 percent from other sources.

Since the oil crises of the 1970s, Japan has tried to shift its dependence on oil from the Middle East to other energy sources. But as of 2000, Japan still imported 90 percent of its oil from that part of the world, mainly from the United Arab Emirates and Saudi Arabia.

In recent years, despite political problems in the region, the low economic costs and advanced oil exploration and development infrastructure have brought back many oil firms that had been looking elsewhere.

Mideast still the mainstay

"From the standpoint of energy security, maintaining and strengthening Japan's presence in the Middle East will continue to be an important policy objective," said Tsutomu Toichi, managing director of the Institute of Energy Economics, Japan.

Meanwhile, Japan has suffered setbacks in its own efforts to secure a stable supply. The government's Japan National Oil Corp., set up to develop overseas oil fields and secure an oil supply, failed to meet its original goal of securing 30 percent of its oil from fields developed by Japanese companies.

The administration of Prime Minister Junichiro Koizumi plans to dissolve the debt-ridden company and integrate its functions into other corporations as part of government streamlining efforts.

In addition, Arabian Oil Co.. an affiliate of the Japanese government, lost its concessions in the Saudi Arabian-controlled part of the Khafji oil field off Saudi Arabia and Kuwait in February 2000. Experts say this proves Japan must work harder to gain access to Middle Eastern oil, especially since there is a new and growing competitor: China.

"Japan has been slow to adapt to the new regulatory framework in the Middle East," said Reinhard Drifte, a professor of Japanese politics at the University of Newcastle, England, and an expert on Northeast Asian energy politics.

"In order to compete with more flexible foreign companies, and to offset the fact that, unlike countries such as China, it cannot sell Middle Eastern countries weapons or offer military support, Japan has to involve itself more in production sharing, service agreements and contributions to the local infrastructure."

If government plans are realized, by 2010 Japan will reduce its dependence on oil to 45 percent of its energy needs while raising those for coal to 22 percent, nuclear power to 15 percent and natural gas to 13 percent. The remaining 5 percent is to come from alternative energy sources.

Natural gas foothold

Trying to both reduce its dependence on Middle Eastern oil as well as meet its promised greenhouse gas emission curbs under the Kyoto Protocol on climate change, Japan has emphasized the importance of natural gas in recent years.

Japan is now the world's largest importer of LNG, of which nearly 84 percent comes from the Asia-Pacific region, especially Indonesia.

But Japanese firms are also involved in exploring for and developing natural gas fields on Sakhalin Island, the Caspian Sea and elsewhere. In June 2001, oil began to reach Japan from a project on Sakhalin, and natural gas imports are expected to start in 2006.

In the Caspian Sea region, Japanese firms are only marginally involved in exploration and development of natural gas reserves, and few experts predict Japan will be a major customer for natural gas from that part of the world.

Meanwhile, major trading house Itochu Corp. is part of the international consortium CentGas, which hopes to build a natural gas pipeline from Turkmenistan through Afghanistan to Pakistan. That project was put on hold in 1998 due to the political situation in Afghanistan, and its future remains unclear.

Government officials as well as foreign and Japanese scholars tout increased use of natural gas as one of the best alternatives to oil and coal, especially as a way to reduce greenhouse gas emissions.

However, there remains one major problem to making extensive use of natural gas, especially in electric power generation -- the lack of a national pipeline grid.

"Instead, Japan's power companies rely on short pipelines between power stations and the nearest port," Drifte explained. "Without a national pipeline system, natural gas cannot become a major energy source because it is too expensive."

Toichi agreed: "To raise the market share of natural gas in Japan, price competitiveness has to be improved. To achieve this, a pipeline infrastructure must be built and new gas utilization technologies have to be developed."

Unpopular nuclear power

The other major source of energy Japan will rely on is nuclear power. At present, 51 nuclear plants provide electricity, and the government plans to build between 10 to 13 more over the next 15 years.

In addition, plans remain to have the plants burn not only traditional uranium fuel -- all of which is imported -- but also mixed plutonium-uranium oxide (MOX) fuel, which Japan can eventually produce on its own.

But a string of accidents, mishaps and coverups since 1995 have created a legacy of public distrust, and opposition at the local government level to nuclear power, in particular the MOX program, continues to mount.

Against this backdrop, antinuclear activists say the government's plans for so many plants are unrealistic.

"The fact of the matter is, there is no way Japan can build all the new nuclear power plants it says it will. With all of the problems and growing public distrust, nuclear power is not a viable option for the future," said Aileen Smith of the antinuclear group Green Action Kyoto.

Even those who insist nuclear power is necessary admit that government forecasts for its future use may be difficult to meet.

"Nuclear power is accompanied by such problems as disposal of spent fuel and the difficulty in winning public support to build new plants," Toichi said. "Under these circumstances, there is every likelihood that construction of new nuclear plants will slow down."

The MOX program in particular has been the bone of much contention between the pro- and antinuclear camps.

Since 1997, when the Kyoto Protocol was agreed on, MOX proponents have said that, in addition to helping make Japan self-sufficient in energy, burning MOX would help reduce the country's carbon dioxide emissions.

Opponents counter that this hardly makes up for the associated dangers of nuclear contamination, and that the proponents' argument is another rationalization to maintain the status quo.

Outdated-policy holdouts

"The government's nuclear power policy is 10 to 20 years behind those of the United States and Europe, and simply reflects the refusal of power companies and the government to consider alternate energy forms," alleged Mika Obayashi, vice chairwoman of Tokyo-based Green Energy Law Network.

For the moment, Japan's future energy policy calls for nuclear power to remain an important part of its overall mix of fossil fuel resources, especially to provide electricity to individual consumers.

Exact forecasts of how much electric power will be needed in the future are difficult because they rely on variables such as economic growth. But it is generally agreed by both government and utility officials that electricity consumption for personal use will continue to increase, even as consumption for industry decreases.

For merchants like Asai in Osaka's Den Den Town, one effect of this trend is likely to be continued sales of household electrical appliances, including air conditioners.

"Japan's summers are not going to get any cooler," he said. "People may wish to conserve in many ways, and air conditioners that use less power or are better for the environment will appear. But air conditioners are now absolutely necessary in Japan in the summer, and that trend will continue."



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