19 - Japan's New Energy Strategy

Summary

Resource-poor Japan is barrelling ahead to rev up its energy security, driven by the specter of another oil crisis, the global rush for energy resources and a simmering gas dispute with China.

Japan's Ministry of Economy, Trade and Industry (METI) released publicly the New National Energy Strategy at the end of May 2006, which calls for, among other things, reduction in the oil-dependency rate to 40 per cent or less by 2030 from the current 50 per cent, promotion of nuclear energy, and securing of energy resources abroad through the fostering of more powerful energy companies.

Apparently in tandem with the new government energy-security policy, the nation's controversial nuclear fuel cycle policy has entered a new phase. The government unveiled a plan to construct a new one trillion yen (US$8.7 billion) fast-breeder reactor, and domestic power firms also announced their plutonium utilization plans in January, ahead of the start in March of a key test operation to extract plutonium at a spent-nuclear-fuel reprocessing facility. In another important development, Inpex Corp and Teikoku Oil Co, Japan's Number One and Number Three oil developers, integrated their operations under a joint holding company in April in a bid to survive cut-throat competition on the global scene.

The New National Energy Strategy also emphasizes the importance of stepped-up assistance to help Asian neighbours with energy-saving efforts and strengthened relations with resource-rich countries through such steps as concluding a free trade agreement, or FTA.

These Japanese moves toward greater energy security come amid growing concerns about whether the nation will be able to ensure stable oil and other energy supplies to fuel its economy, the world's second largest. Crude oil prices are stuck at near record levels of around US$70 per barrel in world markets.

Amid the stubbornly high oil prices, the global competition for oil reserves is intensifying.