A letter to Canada from Japan
Posted: May 07, 2012
Source: Peter Tertzakian, Calgary Herald
A month ago a Japanese man’s Harley Davidson washed up on the BC coast, a piece of flotsam that somehow managed to cross the Pacific after being washed out to sea by the fateful tsunami of January 2011. Last week the owner, Ikuo Yokoyama, was identified, which brought closure to the odd tale. Yet more is embedded in this story. It’s symbolic that an energy intense piece of machinery touched Canada from Japan – a sign of the oil and gas trade that’s germinating between the two countries.
The symbolism is not coincidental. At the same time that Mr. Yokoyama found out about the fate of his rusty motorcycle, Japan shuttered the last of its 50 nuclear reactors last week, the final fallout (bad choice of word) of the Fukushima tragedy that has caused the public to shun atomic power indefinitely.
Nukes represent nearly 13% of Japan’s total energy mix and 18% of its electrical power source. Turning off such a large proportion of vital energy is a monumental event that most countries could not contemplate.
To see the impact graphically, Figure 1 shows a 45-year history of Japan’s energy use. The top line, appetite of consumption, is broken down into a diet of six primary energy sources: natural gas, nuclear, coal, oil, hydro and renewables.
During the post WWII period, up to 1973, Japan was in the mode of rapidly industrializing, alongside most western economies. The steep rise in its total energy appetite was characteristic of a society feeding its factories with a high-carb diet of oil and coal-fired electricity, and mobilizing its population with combustion engines burning diesel and gasoline. It’s a pattern of growth that can be seen repeatedly in many emerging economies.
All was motoring along well until the oil price shocks of 1973 and 1979. In response to the crises, the Japanese government championed aggressive policies to halt oil growth in favour of other primary sources of energy. In fact, the genesis of nuclear power was mostly a consequence of the oil price shocks. Distaste for oil in the 1970s also led nations like Japan to pioneer the importation of liquefied natural gas (LNG). The emergence of nukes, LNG and coal after the 1970s is clearly seen in Figure 1.
Ironically, in the “Land of the Rising Sun,” only about 0.2% of its energy diet is renewable, in part because the country decided to focus on efficiency and conservation as an alternative to more supply. Through strict regulation and cultural will, Japan has become one of the most energy frugal nations in the industrialized world. On a per capita basis, the average Japanese person consumes less than half that of the average North American. Were it not for best-in-class attitudes targeting energy conservation and efficiency, Japan would be facing even more challenges today. Even so, the Japanese will have to tighten their electrons more, until alternative infrastructure is built to replace their nuclear power plants.
Since the Fukushima disaster, Japanese energy companies have been scouring the world for long-term, diverse and secure supplies of replacement energy. Coal and LNG are the only two scalable options on the menu; carbon emissions are a necessary tradeoff against the fear of atomic radiation. If all 44.2 Gigawatts of nuclear generating capacity is replaced by LNG, we estimate an incremental 6.0 Bcf/d of imports would be needed.
That’s why the Japanese have been one of the most active investors in Canada’s natural gas industry. Deals like the Encana/ Mitsubishi joint venture and the Nexen/ INPEX agreement are a harbinger of more to come, and we’ll likely see additional Canadian LNG projects proposed for the latter half of the decade. That’s all good, yet it would have been nice if Canada’s oil and gas industry had the vision to “go global” several years ago. Export facilities would have been built by now and we could have been helping our Japanese friends today. Potentially, we could have been supplying them with the bulk of their additional needs, and also competing with Australians in other lucrative markets like Korea and China. Producers would be realizing much higher prices for their exports by not being hostage to the US shale gas assault.
Hindsight is 20/20 as they say, and being visionary is hard. Maybe the floating Harley Davidson can give inspiration by reminding us of a quote from R. M. Persig’s cult classic book, Zen and the Art of Motorcycle Maintenance. “Is it hard? Not if you have the right attitudes. It’s having the right attitudes that’s hard.”
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