IEEJ：May 2016○ｃ IEEJ 2016

Special Bulletin
A Japanese Perspective on the International Energy Landscape (270)

May 6, 2016

G7 Energy Ministers Release Energy Measures in Joint Statement
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn May 1-2, energy ministers of the Group of Seven industrial countries met inKitakyushu. In a run-up to the G7 Ise-Shima Summit on May 26-27, the ministerial meeting focusedon energy problems. Japanese Economy, Industry and Trade Minister Motoo Hayashi chaired themeeting to deal with global energy challenges and relevant measures for the G7 countries. To sum up
discussions there, the ministers issued a joint statement covering 34 items.
The Ise-Shima Summit will discuss various important challenges including how tomaintain the world economy’s sustainable development. In this context, the G7 energy ministers
discussed how or whether energy and environmental problems would affect the world’s sustainabledevelopment. The discussions were based on a new situation after the crude oil price plunge and theParis Agreement at the 21st Conference of Parties to the United Nations Framework Convention on
Climate Change, or COP21.
As indicated by the joint statement, therefore, the G7 energy ministers discussed a wide
range of topics from how best to secure energy investment and natural gas/LNG market development
to high-quality energy infrastructure development, cyber security and energy, and renewable energy
and energy conservation promotion. The topics also included support for Ukraine, nuclear safety andenergy cooperation with developing countries. In this way, the energy ministers discussed acomprehensive list of energy challenges and measures that the G7 nations should tackle. Among thewide range of topics, however, the meeting particularly highlighted energy sector investment under
low oil prices and Asian gas/LNG market development.
The G7 energy ministers acknowledged positive effects of low oil prices on the world
economy and the G7 countries but indicated their concern that the continuation of low oil prices
would discourage upstream oil development investment to cause a future price hike (to thedisadvantage of the world economy). So, they pointed to the significance of appropriate investment.
In fact, international oil companies have substantially reduced upstream investment in 2015 and2016, indicating that such investment cuts would have negative impacts on future supply capacity
expansion. Weak prices for crude oil and other fossil fuels in general could become a disincentive forinvestment not only in upstream oil development but also in energy conservation and in non-fossil
1

IEEJ：May 2016○ｃ IEEJ 2016energy sources (including renewable energy and nuclear power). At a time when countries in theworld are required to enhance initiatives to develop the energy supply and demand structure and go
in the direction of a low-carbon society after the Paris Agreement, weak oil prices have made it
uncertain to make investment decisions. So, the energy ministers concluded that it is important forthe sustainable development of the world to promote investment in clean energy sources andinfrastructure contributing to environmental and energy security measures even under low oil prices.
“We will play a leading role in facilitating investments for secure and sustainable energy,” the jointstatement said.
The emphasis on the gas/LNG problems reflected the problem consciousness of Japan as
the G7 chair that led the meeting to take up the importance of gas/LNG problems in Asia as a large
topic. Although the G7 meeting needed to deal with gas security problems for European G7members as well as the importance of U.S. LNG, discussions there focused on the viewpoint of Asia
facing with the great challenge of gas/LNG market development. In the Asian LNG market on which
Japan heavily depends, prices are linked to crude oil prices and fail to reflect the LNG
supply-demand balance in a timely, direct manner. The Asian gas/LNG market has fallen short ofwell-functioning as a liquid, free and transparent market.
Discussions at the ministerial meeting emphasized that the development of gas/LNG
market functions would contribute to enhancing gas supply security and the further sounddevelopment of the market. In this respect, the G7 welcomed an LNG market strategy that wasreleased by the Japanese Ministry of Economy, Trade and Industry in line with the meeting andcalled for building a highly liquid LNG market and making Japan an LNG trading and pricing hubby the first half of the 2020s. It was pointed out that key specific measures to enhance LNG market
functions include the removal of such conditions (including the destination clause) as those limiting
free, highly liquid trading, and the enhancement of LNG and gas market information and datacollection and classification.
In the future, it will be important to implement more specific initiatives in this respect. It
was significant for the G7 joint statement to have presented desirable policy directions as the sevencountries’ common acknowledgement. However, those that will implement energy investment andform and develop the LNG market will be private companies. After presenting policy directions,
governments should prepare or develop systems, support and incentives for private companies to goahead. To this end, governments first should grasp actual private sector needs and market realities
accurately. In the future, the policy side and market players will be required to have necessary andsufficient dialogue and implement practical initiatives based on the talks.
As noted above, the latest G7 energy ministers discussed a wide range of topics toward
energy measures that could contribute to the world’s sustainable development. The topics included
cyber security and energy security and others for which further sufficient global initiatives should be2

IEEJ：May 2016○ｃ IEEJ 2016

taken, although this limited report fails to cover them. The G7 will have to address global problems
not only from the viewpoint of short term emergency but also from the medium to long-term
necessity.

Contact: report@tky.ieej.or.jp
The back issues are available at the following URL
http://eneken.ieej.or.jp/en/special_bulletin.html

3