Japan works to limit dependence on oil

TOKYO - Japan has set out an ambitious goal of replacing a fifth of its oil demand with biofuels or gas-to-liquid (GTL) fuels by 2030, but the plans will do little to ease its insecurity over imported energy supplies.

Japan's energy agency has been working for more than two years to iron out long-term energy policy guidelines aimed at enhancing national security for the resource-poor country.

So far the Government has focused on limiting Japan's dependence on crude oil - almost all of which is imported - to 40 per cent of total energy needs from about 50 per cent currently.
But a new draft due in February will be the first to specify a target for biofuel and GTL usage, said an official at the Agency for Natural Resources and Energy, a unit of Japan's Ministry of Economy, Trade and Industry (METI).

It is expected to be formalised in June.

"It will be first time to mention in our guideline that our country should replace 20 per cent of petroleum products used now with non-conventional fuels to achieve an objective, for example, bio-ethanol and GTLs," said the official, who declined to be named.

GTL technology processes natural gas rather than crude oil to make clean fuels such as low-sulphur diesel, which emits less greenhouse gases than gasoline.

For the world's third-largest oil consumer, securing non-conventional energy such as bio-ethanol and GTLs may be easier than increasing competition with world No. 2 consumer China to get into upstream crude and gas projects.

But analysts said introducing bio-fuels and GTLs would still mean a heavy dependency on imported energy.

"Theoretically speaking, the Government guideline is on the right track. Especially, the introduction of GTL fuels looks practical in the long term, and it will encourage new global investments in GTL projects not just in Qatar, but also other gas producers like Indonesia and Australia," said Hidetoshi Shioda, an energy analyst at Mizuho Securities.

Gulf state Qatar, home to the world's third-largest reserves of natural gas, is set to have the world's first commercial GTL facility in 2006.

Gasoline with up to 25 per cent bioethanol is used in Brazil, the world's largest bioethanol producer. But analysts said Japan's 20 per cent target looked too ambitious, compared to a European Union target of 5.75 per cent biofuel content by 2010.

The Environment Ministry in Japan had aimed to introduce auto fuel containing 3 per cent bioethanol - often made from sugar, wheat, corn or soybeans - onto the retail market at the start of the fiscal year from April 2005.

But it did not become available at due to a scarcity of bioethanol.

The Government requires oil firms to invest in making bioethanol-blended gasoline.

- REUTERS