IEEJ： November 2013ｃ IEEJ 2013○Special Bulletin
A Japanese Perspective on the International Energy Landscape (151)

November 22, 2013

A Japanese View on World Energy Future
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn November 21 in London, JETRO London and the Japan Society cosponsored a seminar
titled "A Japanese View on World Energy Future: The Impact of the Shale Revolution." Based on thetheme, I made a presentation, followed by comments by Mr. John Mitchell, Associate Fellow forEnvironment and Resources at Chatham House, and Mr. Howard Rogers, Director of the NaturalGas Program at the Oxford Institute for Energy Studies. About 70 people participated in the seminarand proactively asked questions about my presentation and the abovementioned two experts’comments.
In my presentation, I outlined the world's energy outlook through 2040 in line with theIEEJ's "Asia/World Energy Outlook 2013” as introduced in my report titled "A Japanese Perspectiveon the International Energy Landscape (148): Analyzing Changes Induced by the Shale Revolution.”
I emphasized that the gravity of global energy problems will shift to Asia and that technologicaladvancement will dramatically change world energy portfolios, energy security and environmentalloads. In addition, I noted that progress in the shale revolution would exert a great impact on global
energy supply and demand, economies and industries.
Regarding the impact of the shale revolution, I explained how substantial progress in thedevelopment of unconventional energy resources such as shale gas and oil in the United States andthe rest of the world would impact competition between primary energy sources, internationalenergy trade, carbon dioxide emissions and gross domestic product. In summary, I specified“winners and losers” in the substantial progress in unconventional energy resources development
through a quantitative analysis. Among energy sources, I described gas as a winner and coal as aloser. I also indicated that the United States would be the largest among many countries as
beneficiaries from the progress, while negative effects would emerge on the Middle East and theFormer Soviet Union that depend on conventional energy resources exports.
At the end of my presentation, I outlined Japan's energy situation after the Fukushima
nuclear plant accident and challenges involving energy policy revisions. I told the British audiencethat even more than two years after the Fukushima accident, Japan faces many challenges among
which very important and urgent ones include whether or how to restart off-lined nuclear powerreactors, policy revisions to establish the best energy mix, electricity market system reforms, how1

IEEJ： November 2013ｃ IEEJ 2013○

best to secure the stable procurement of fossil fuels including liquefied natural gas, renewableenergy and energy conservation promotion initiatives and relevant problems, and the harmonizationof energy and environment policies.
In response to my presentation, Mr. John Mitchell commented that it is important toanticipate the energy future over a long term through 2040 and that a medium-term perspective tobridge long- and short-term outlooks is required in the actual energy market. Energy market
participants and players make investment decisions in consideration of a five- to 10-year time span
while anticipating the far future. As investment under these decisions provides key factors forshaping a farther energy future, anticipating medium-term developments is important.

Hel also

noted that the analytical finding that the substantial progress in unconventional resources
development would greatly affect major conventional energy exporters including the Middle East
might be very important. His view was that the negative effects of the shale revolution could
destabilize oil-producing Middle Eastern countries and should be analyzed from other angles.
Similar comments came from the audience, prompting me to think that the shale revolution's impact
on or implications for each region should be analyzed more deeply, based on the quantitative
analysis in the Outlook.
Mr. Howard Rogers also made very interesting comments on how the Asian LNG
market will change as U.S. LNG exports expand amid the shale gas development progress. Hepointed out that while buyers and sellers in the Asian LNG market are expected to have toughnegotiations on LNG pricing, past changes in European and American markets indicate that theAsian market has already been in transition to great changes. He made the following four key points:(1) Japanese electric utilities as major LNG buyers have become desperate to form reasonable,
competitive prices in the face of tough business conditions, (2) moves for a new pricing method
cannot be ignored as LNG prices’ linkage to crude oil prices is losing its rationality due to market
changes, (3) U.S. LNG exports, including those under direct contracts with Japanese, South Korean
and other Asian buyers and those to be procured by GDF-Suez, BG and other “aggregators” for sales
to the Asian market, will have a great impact, and (4) competition between suppliers for markets will
intensify as Russia, Canada and Mozambique are expected to launch new LNG projects around 2020.
He indicated that while revisions to terms and conditions in existing LNG import contracts may bevery difficult, the abovementioned factors signal great changes in the Asian LNG market.
In addition to these important comments, the audience proactively asked questions about
Japan’s energy and environment policies as well as the impact of unconventional energy resources
development. In this sense, the seminar was very significant. It is significant for Japan to inform therest of the world of its views on global energy problems. We may have to continue to hold this kindof seminar for sending Japan’s messages throughout the world.
Contact: report@tky.ieej.or.jp
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