Boston, MA -- (SBWIRE) -- 06/08/2012 -- BMI View: Over the near term, Japan's consumption of imported oil and natural gas will remain at heightened levels as a result of nuclear power generation losses in the wake of the 2011 earthquake and tsunami. Over the longer-term, a reassessment of energy strategy means nuclear will play a less prominent role and, inevitably, gas will have to make up part of the shortfall. This suggests Japan will become a still bigger player in global LNG purchasing.

The main trends and developments we highlight for Japan's Oil and Gas sector are:

- Japanese oil consumption has been undermined by sluggish economic activity, fuel efficiency improvements and inter-fuel substitution in favour of gas and nuclear power. However, our data indicate only slightly lower consumption in 2011, of around 4.41mn barrels per day (b/d), which is higher than earlier forecasts made after the earthquake and subsequent tsunami in March 2011. This has resulted in greatly reduced nuclear generation and a significant upturn in oil- and gasfired power generation to compensate. By 2016, the country is expected to be consuming 4.46mn b/d of oil.
- The country's nuclear sector, which accounted for 13% of primary energy demand (PED) in 2009, has virtually shut down following the earthquake. The country will turn to other fuels, notably oil, coal and gas in the form of imported liquefied natural gas (LNG) to fill this gap. We expect LNG in particular to play a crucial role. Furthermore, rising import requirements have the potential to reshape the Pacific Basin LNG market.
- Japan's oil industry is likely to cut its purchases of Iranian crude in March 2012, Akihiko Tembo, President of the Petroleum Association of Japan, said in late January 2012. He did not provide further details. Japan is under pressure to cut oil imports from Iran as Japanese banks need to gain a waiver from US, after it imposed sanctions designed to hamper Iran's ability to sell oil overseas.
- In January 2012, ExxonMobil said it was in talks with subsidiary TonenGeneral Sekiyu regarding the possibility of restructuring its near-US$3bn stake in the oil refiner. Exxon said it had no plans to exit the Japanese market, contrary to recent speculation.
- We have upwardly revised our gas consumption estimates for 2011, 2012 and 2013 following the earthquake and tsunami. We expect gas consumption to have risen to 106.7bn cubic metres (bcm) in 2011, and it is expected to rise steadily towards 112bcm by 2015/16 - largely in the form of imported LNG.

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