WATCHING THE WORLD JAPAN THRIVES ON IMPORTS

With Roger Vielvoye from London Japan's formidable industrial economy manages to perform efficiently without any help from home-produced oil and gas. While the U.S. and the European Community agonize over political implications of importing 25-40% of their crude oil as war in the Middle East becomes more likely, the Japanese quietly go on buying more than 99% of their supply from abroad. Living with the knowledge that in a crisis, only ample inventories lie between an oil-hungry economy and

Jan. 14, 1991

3 min read

Japan's formidable industrial economy manages to perform efficiently without any help from home-produced oil and gas.

While the U.S. and the European Community agonize over political implications of importing 25-40% of their crude oil as war in the Middle East becomes more likely, the Japanese quietly go on buying more than 99% of their supply from abroad.

Living with the knowledge that in a crisis, only ample inventories lie between an oil-hungry economy and disaster has become part of the way of life for Japan.

Even the equity shareholdings of Japanese companies in foreign producing operations remain small. Local refiners must rely on contracts with major producing countries-notably in the Middle East.

LNG SUPPLY

Dependence on foreign contracts extends beyond crude oil into the gas business. Japan is the world's biggest importer of LNG and has been seeking new supplies from the Middle East and Far East to boost imports later in the 1990s.

Undeterred by the current situation in the Persian Gulf, Chubu Electric Power, the Japanese power and gas utility, is close to signing an agreement with Qatargas, a joint venture between Qatar General Petroleum Corp. and European and Japanese partners, that would allow the first phase of an LNG scheme based on massive North field reserves to get under way.

Japan was not always so completely dependent on imports for its energy supply. Before World War 11 about 30% of the country's needs were generated internally.

There are still small oil and gas producing operations onshore and offshore. And the few companies involved have been encouraged by higher prices offered since Iraq's Aug. 2 invasion of Kuwait.

However, production has been declining steadily since the slump in crude oil prices in the second half of the 1980s, and production lingers at about 9,500 b/d. Price declines of the 1980s also scotched most plans for further onshore and offshore development.

Some projects have survived, however. Last month a small new offshore field was put on stream by the government backed Japan Petroleum Exportation Co. (Japex) in partnership with Niigata Oil Exploration Co., Mitsubishi Gas Chemical Co. and Japex Offshore Ltd.

Iwafune field in the Sea of Japan is the country's largest offshore development. It is producing about 700 b/d of oil and 1 MMcfd of gas. By 1992 production is to rise to about 7,000 b/d and 35 MMcfd, which should just about double indigenous crude production.

MORE PROJECTS

The Japanese government helps fund local exploration, but stimulating drilling still requires consistent world crude prices of more than $20/bbl.

Teikoku Oil Co., one of the three domestic producing companies, is looking at plans for several new developments that would match the production of Iwafune field.

And Japex is working on plans for a new pipeline that will link gas fields in Niigata with the city of Sendai in Miyago Prefecture. And if world prices remain high there are several other gas fields that could be developed during the decade.