Japan scrambles the planet looking for gas deals
By Tim Daiss -- Dec 04
Since the March 11, 2011 Fukushima nuclear disaster and Japan's subsequent shut down off all but two of its 50 nuclear reactors, the country is frantically trying to secure natural gas for electricity generation. However this has proven problematic for Japan, who has virtually no hydrocarbon resources of her own.
For starters, Japan's electricity sector relies mostly on imported LNG. Yet, LNG in Asia (which is still tied to oil prices) is expensive, more than three times the price of natural gas in North America where prices are mostly tied to supply and demand.
Consequently, Japan has scrambled the planet looking for and striking gas deals from the US to Australia, Africa, the Middle East, and Southeast Asia. A natural place for Japan to also look is neighboring Russia. Though relations between the two have been historically chilly, they compliment each other perfectly. Japan needs natural gas and Russia needs new gas customers.
Russia, an energy heavyweight, relies on hydrocarbons to power its economy, and most of that demand comes from Europe. But that has become a quandary for Moscow. The Eurozone has just entered a double dip recession and gas demand is dropping. The price of gas in Europe is also falling, which is taking a toll on Russia's coffers.
The latest gas news between Japan and Russia broke in November when a Japanese consortium announced plans to build a 1,400-kilometer (869-mile) gas pipeline from Russia's Sakhalin Island to Metro Tokyo.
According to a feasibility study, the offshore pipeline would cost 300 to 400 billion yen ($3.65 billion to $4.87 billion) with a 5-7 year completion time.
Yet this is not the first time that an energy company has tried to build a pipeline from Sakhalin to Japan.
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