Coal Winning Out As Expensive Oil Impairs Trade Balance
BMI View: We expect oil imports in Japan to see long term declines as utilities are increasingly turning to lower cost sources of coal to substitute lost nuclear power generation. LNG imports are also expected to stabilise from a peak in 2012 but will be favoured over oil. Crucial to the country's fuel demand will be the decision on nuclear restarts, which if authorised, would further reduce demand for oil and LNG in Japan.
With Japan's 44GW of nuclear power currently offline due a rigorous inspection schedule, the country has been hit hard by the growing cost of fossil fuel imports. Japan is currently dependent on imported energy sources for around 96% of its domestic energy use, though this could be reduced to 80% if nuclear power were available at pre-Fukushima levels. Oil, liquefied natural gas (LNG) and coal are the main imported fuels.
The vast majority of imported energy is used in Japan's power generation sector, and with the shutdown of nuclear power over the last two years, the demand scenario for oil, coal and LNG has been considerably altered. Directly following Fukushima, oil consumption grew rapidly as an immediate solution to fill the void left by nuclear, while gas consumption also grew as record levels of LNG were imported in 2012. Coal power was largely restrained by limited capacity and Japan's environmental ambitions.
|Post Fukushima Spike Reacting To Price|
|LNG, Crude, HFO And Coal Use In Power Generation, metric tonnes|