But Japan is still vulnerable, its fate tied to stability in the Middle East. About 10 percent of its imported oil comes from Iran, and while it has tried under U.S. pressure to wean itself of that dependence, it appears unlikely to end it completely. (In March, Secretary of State Hillary Rodham Clinton said the “significant” voluntary cutbacks would allow Japan, along with 10 European countries, to be exempted from Washington-backed sanctions designed to punish Iran for its nuclear program.)
Though Japan receives most of its LNG from the Asia-Pacific, particularly from Australia and Malaysia, LNG prices are typically tied to those of crude oil. So when instability roils Syria or Sudan, Japan pays more for both of its preferred fossil fuels, not just one of them.
Any crisis in the Strait of Hormuz, which Iran has threatened to block, would pose immediate problems for Tokyo. About 90 percent of Japan’s oil comes from the Middle East, most of it passing through the strait.
Experts in Tokyo say Japan’s economy is now at the mercy of its energy supply. A recent forecast from Japan’s Institute of Energy Economics, a government research body, laid out two scenarios — one in which reactors gradually come back online beginning this summer, and one in which they don’t.
With some of its reactors running, Japan’s gross domestic product in 2012 would grow 1.9 percent, according to the first scenario. Industrial production would rise 5 percent from the previous year, and the country would have a trade surplus — its standard for three decades, before a deficit in 2011.
Without its reactors running, though, Japan’s GDP would grow just 0.1 percent. The country would be 12 percent short on electricity during the hottest months, forcing a reduction in factory production and further encouraging corporations to relocate overseas. Just as important, the country would log another trade deficit — projected at $57 billion. Much of this will be directly attributable to fossil fuel imports, which will account for about 21.1 trillion yen, or $255 billion, which is 30 percent of Japan’s total imports, according to the report.
For perspective, if Japan managed to import just 16.4 trillion yen, or $198 billion, in fossil fuels, the number in 2010, the trade deficit would all but disappear.
Seeking ‘best energy mix’
By mid-summer, Japan plans to announce a new long-term strategy — an outline for the “best energy mix” among nuclear power, fossil fuels and renewable sources. Few energy executives expect that nuclear power will account for the 50 percent that the government once suggested.
So Japanese companies are already paying for imports to fill an expected void in next decades.
One such project was finalized in January, when a Japanese energy company, Inpex, teamed up with a French company, Total SA, and signed off on a deal to export gas from a remote spot in the Timor Sea, hundreds of miles off the northern tip of Australia. That gas, officials involved with the deal said, will be pulled from the depths, pumped through a subsea pipeline to Darwin, Australia, then cooled to liquid form, shrinking to 1/600th of its original volume. Beginning five years from now, as part of a $34 billion deal, Japanese companies — including Tokyo Electric Power, operators of the Fukushima nuclear plant — will receive more than 6 million tons of that gas annually, about the total the country now consumes in a month.
“In the wake of Fukushima, there’s a real rethink on the role of nuclear power going forward,” said Bill Townsend, a joint venture manager at Inpex. “Japanese companies need something to fill the gap . . . and given Japan’s desire and need to have long-term security, this fit very neatly into the story line.”