LNG imports and nuclear energy have long played a key role in Japan’s electricity generation, as the country lacks domestic natural resources. However, since the Fukushima incident, Japan has increasingly been relying on the import of fossil fuels. As a result, high energy bills are pushing the country to reconsider its energy mix and look for alternative energy supplies.
During the first quarter of 2012, Japan announced that it had successfully extracted methane hydrates from a location 50 miles of the Atsumi Peninsula[i]. This technological breakthrough could unlock an equivalent of 100 years of Japan’s natural gas consumption. Commercial production is predicted by 2018[ii].
Japan is currently one of the key LNG markets, paying some of the highest prices. Not long ago, the American shale gas revolution took the entire industry by surprise. It radically changed the energy landscape of the United States, which is now likely to become a LNG exporter. In the same manner, the development of methane hydrates could potentially develop an equally profound shift in Japan’s energy outlook.
This premise raises the question as to whether Japan will be successful in initiating its own energy revolution. Will Japan manage to produce methane hydrates at a commercial scale and at a competitive price? And how fast will it be able to do so? To what extent will the development of Japanese methane hydrates be moderated by other competitive fuels or by environmental concerns? What will Japan’s future LNG import quotas look like, if it is successful? And will Japan’s advances spill over to other countries?