Eric Watkins
Senior Correspondent
LOS ANGELES, Apr. 28 -- Japanese oil and gas firms—prodded by demand growth and rising prices for oil, natural gas, and LNG—are stepping up efforts to increase production of domestic gas supplies.
According to Japan's Nikkei stock market index, the price for high-sulfur fuel oil C was raised by 3,250 yen from last quarter, or 5.2%, to 66,000 yen/kl That record price was a 26-year high.
But the cost of imported gas also is rising. It stood at more than 40 yen/cu m as of January, including transportation and insurance costs—up 4% from the previous month and 24% higher than the same month in 2007.
With more than 90% of Japan's gas demand now being met with imported LNG, competition for the limited supply of domestic gas is expected to intensify as it now runs 10-20% cheaper than LNG.
To meet demand, especially from power plants, leading Japanese oil and gas firms are rushing to develop gas fields in Niigata Prefecture, which accounts for roughly 70% of Japan's domestically produced gas.
Teikoku Oil, which produces 4.4 million cu m of gas in Japan, will spend some 3 billion yen to drill a new well 4,900 m deep at its gas field in Niigata Prefecture. Production is set to go online in October.
Teikoku hopes the well will increase daily output by 300,000 cu m to 500,000 cu m. Due to demand growth, largely from industrial customers, Teikoku also is considering an increase in the number of its domestic wells.
Meanwhile, Japan Petroleum Exploration Co. has spent some 10 billion yen to begin test drilling to a depth of about 4,300 m at a new offshore gas field about 8 km off Niigata Prefecture. The firm plans to start test drilling at another site in the same area in late May.
It produces 510,000 cu m of gas at another offshore gas field off Niigata that is forecast to produce gas for only about 10 more years.
The Japanese government, meanwhile, is looking to exploit the country's methane hydrate reserves, estimated by the Ministry of Economy, Trade, and Industry at 1.1 trillion cu m, an amount 14 times larger than Japan's annual gas consumption.
The world's largest methane hydrate reserves are thought to be off Japan's Aichi and Mie prefectures. Estimated at 7.4 trillion cu m, the reserves are equal to about 100 times the amount of gas annually consumed in Japan.
Contact Eric Watkins at hippalus@yahoo.com.
