Japan remains committed with public support for upstream developments after G7 pledge

Japan will remain committed with its public support for oil and gas upstream developments albeit in a more selective manner, following the latest commitment made by the G7 energy ministers, an official at the Ministry of Economy, Trade and Industry told S&P Global Commodity Insights May 30.

"We will maintain upstream developments that contribute to [Japan's] energy security," the official said. "There is no change in our policy for using public support for that."

The comments followed the G7 climate, energy and environment ministers' May 27 communique, which recognized that "advancing national security and geostrategic interests is crucial," and "accelerating the international clean energy transition and phasing out continued global investment in the unabated fossil fuel sector is essential" to keep a limit of 1.5 C temperature rise within reach.

"We commit to end new direct public support for the international unabated fossil fuel energy sector by the end of 2022, except in limited circumstances clearly defined by each country that are consistent with a 1.5 C warming limit and the goals of the Paris Agreement," G7 ministers said.

Following the G7 pledge, Japan will be able to pursue upstream developments that contribute to its national security, as well as for geostrategic interests such as reducing its dependency on Russian energy, the official said.

Japan's public support for upstream investments will still be more selective, considering aspects of the Paris Agreement among other factors, the official added.

The latest move came as Japan is considering providing public finance to help expand US LNG projects, METI minister Koichi Hagiuda said May 10, as the country moves to phase out its dependency on Russian energy.

G7 leaders agreed May 8 to phase out Russian energy, including oil, "in a timely and orderly fashion," while ensuring "stable and sustainable global energy supplies and affordable prices for consumers."

Japan also aims to boost its equity liftings in its total oil and gas imports to more than 50% in 2030 and over 60% in 2040 under its Strategic Energy Plan, the country's principle energy policy. The ratio stood at 40.6% in fiscal year 2020-21 (April-March).

Phasing out coal

The G7 ministers also agreed to decarbonize their respective power generating sectors by 2035 as part of the communique, marking a major milestone in the road to a complete transition to net-zero emissions by 2050.

"Recalling our agreement in the 2021 Climate and Environment communique, we further commit to a goal of achieving predominantly decarbonised electricity sectors by 2035," said the ministers, adding that the G7 countries will take timely steps towards "the goal of an eventual phase-out of domestic unabated coal power generation."

While the G7 countries committed to scale up necessary technologies and policies for the clean energy transition, the ministers also said: "In doing so, we reaffirm the importance of national energy security, affordability and resilience and underscore the importance of providing support for affected workers, regions and communities."

Commenting on the communique, Japan's Chief Cabinet Secretary Hirokazu Matsuno said May 30 that the country's basic policy is to reduce its dependency on coal-fired power generation as much as possible in alignment with the latest agreement, while ensuring a stable supply.

"For this reason, we will continue to surely phase out inefficient coal-fired power toward 2030, and our policy is to accelerate our efforts to replace it with decarbonized thermal power using hydrogen, ammonia, CCUS (carbon capture, utilization and storage) and among others toward 2050," Matsuno said.

"This way we aim to achieve both decarbonization and energy security," he added.

Under the Strategic Energy Plan, approved by the cabinet in October, the country expects coal to comprise 19% of FY 2030-31 power supply sources, with LNG accounting for 20% and oil for 2%, which gives a total of 41% for fossil fuels, compared with 32% for coal, 37% LNG and 7% oil in FY 2019-20.