Japan is calling for a revamp of the global LNG market as it ramps up its hunt for new sources of energy to deal with the Fukushima nuclear disaster.
Trade minister Yukio Edano told a conference of producers and consumers Wednesday in Tokyo that liquefied natural gas is set to be a huge growth sector in the coming years and urged efforts to rectify the huge price disparities among different regions.
He said Japan’s move away from atomic energy after the March 2011 meltdowns at the Fukushima No. 1 plant in Fukushima Prefecture and the idling of all nuclear reactors over safety fears has spurred demand for alternative sources of energy, such as LNG, a relatively cheap and clean form of fuel.
“LNG imports have grown rapidly since the nuclear crisis, shooting up from 70 million tons in 2010 to an expected 90 million in 2012,” Edano told some 500 participants from around 30 nations at the conference. “For Japan, how to procure cheap LNG is a significant challenge to address both for the public and private sectors.”
Japan, which has few natural resources of its own, and South Korea are the world’s top LNG importers, accounting for nearly half of the market.
However, Edano said present pricing structures mean LNG buyers in Asia, where the price is index-linked to oil, are forced to pay far more than their counterparts in North America, where prices are based on supply and demand.
“As one means of securing the stable procurement of LNG, the government this fall will start studying the creation of an LNG futures market,” Edano said.
He added that with more projects constantly coming online as such technological innovations as fracking make gas cheaper to extract, supply is set to rise.
But demand for LNG is also expected to increase, Edano warned. “LNG demand and supply will both grow dramatically in the next decade, so the sector will greatly change,” he said.
The United States has increased production of shale gas, a natural gas trapped in flakes of sedimentary rock, pushing down the price for natural gas in North America and boosting interest around the world.
Last week, the government announced its intention to wean Japan off nuclear power during the 2030s, although the Cabinet failed to endorse the publicly favored policy earlier this week. Atomic energy provided about a third of the nation’s electricity before the Fukushima crisis.
The government is facing a possible election later this year and atomic energy has become one of the leading issues, with regular demonstrations calling for its abolition.