Japan’s recovery from Fukushima shows resilience

The bullet trains run on time, the Tokyo Skytree is brightly lit and the sushi is impeccably fresh. Perhaps no other country could have coped as Japan has with losing 30 per cent of its power generation at a single stroke when the Fukushima accident forced the shutdown of its nuclear reactors.

The crisis and its aftermath reiterated the energy vulnerability of Japan and its East and South-east Asian neighbours, such as South Korea, Taiwan and Singapore. With minimal fossil fuel resources of their own, they rely on oil imports, mostly from the Middle East, and gas and coal from a wider variety of suppliers.

Dramatic changes in the world energy system are leading Japan and its compatriots to think differently about energy security.

Some nuclear reactors are restarting and to replace the others Japan is stepping up renewable energy, the costs of which continue to fall. As the world's largest importer of liquefied natural gas (LNG) and third-largest importer of oil, it benefits from the recent slump in prices, triggered by the US shale revolution.

After Fukushima, soaring imports of oil and LNG forced Japanese utilities to reduce their costs, instead of passing on the bill to the consumer. Japan is hoping for a more flexible global gas market, and seeking to buy US gas to break away from pricing LNG against oil, the system it itself pioneered in the 1970s.

Japan’s stagnant economy and shrinking population have caused a tapering of its energy use, but demand from the other leading developed Asian countries continues to rise strongly. They are in both a stronger and weaker position than China. Stronger, because their energy consumption is far smaller, and does not disrupt and overwhelm global markets as China’s has since 2003. Their energy efficiency is higher, and their pollution far less.

But they are also weaker because they do not have the same diplomatic and military muscle to enforce their energy wishes. China is largely self-sufficient in domestic coal, still a major oil and gas producer with major potential for shale resources, and has secure overland routes to hydrocarbon producers in central Asia, where it has great political clout, and Russia.

With 83 per cent of their oil coming from the Middle East, Japanese strategists and businesspeople are concerned about conflict in the region. They watch the struggle against ISIL and the Iranian nuclear negotiations keenly, without however being able to do much about either.

Japan is highly unlikely to play a security role in the Middle East, beyond its contribution to the international antipiracy unit based in Djibouti. The Japanese public is opposed to overseas military deployments and, in a hopefully unlikely US-China confrontation, Japan’s forces would be needed at home. Much the same applies to South Korea and Taiwan.

The prospect of a US retreat from a military role in the Arabian Gulf thus concerns Japanese policymakers. But that very vulnerability may indicate why the US is likely to stay around, thereby guaranteeing oil supplies to key allies in East Asia, and conversely, posing an implicit threat to China.

Japan does have a long business presence in the Middle East, dating back at least to the 1960s. Japanese and South Korean companies are active in Iraq, although not to the same extent as the Chinese. They are also developing fields in Abu Dhabi, and hopeful of winning a share in the renewed Adco onshore concession. This month the Ministry of Economy, Trade and Industry signed a deal with Adnoc to store oil in Japan, which would be made available to the Japanese in the case of an emergency.

This may lack the glamour of grand strategy. But for both sides in the relationship, deepening and diversifying relations, and ensuring social and technological resilience to unexpected catastrophe, are the foundations of solid energy security.

Robin Mills is head of consulting at Manaar Energy, and author of Capturing Carbon

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