IEEJ： November 2013ｃ IEEJ 2013○Special Bulletin
A Japanese Perspective on the International Energy Landscape (150)

November 14, 2013

Deepening Japan-Australia Energy Relations
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn November 12 and 13 in Australia's Brisbane, the Griffith Asia Institute of Griffith
University sponsored a conference titled "The Australia-Japan Dialogue: Energy Security:Challenges and Opportunities." The conference focused particularly on energy problems involving
the two countries within the bilateral dialogue framework. Nearly 30 Japanese and Australianintellectuals and experts participated in discussions there. I here would like to introduce impressive
points of the discussions.
First, I would like to point out that the Australian side indicated great interests in Japaneseenergy problems. As Japan is the largest buyer of energy commodities (including liquefied naturalgas, coal and uranium) from Australia, Japan's energy situation and energy policy revision
discussions after the March 2011 Fukushima nuclear plant accident are very important problems
linked to Australia's national interests. Australian participants offered serious questions and opinions
in response to Japanese participants' presentations on various matters including the pending restart ofnuclear reactors, advisory panel discussions on the “best energy mix” policy, backend and othernuclear fuel cycle problems, renewable energy deployment problems after the introduction of thefeed-in-tariff system, the prospects of electricity system reform, possible further progress in energy
conservation, and efforts for stable procurement of fossil fuels including LNG.
Particularly, Australians' high interests in the LNG related issues were impressive to me.
Australia is the largest LNG supplier to Japan, while Japan is the largest LNG export destination forAustralia. Furthermore, Australia is considering many new LNG projects including those in which
Japanese firms will participate. Australia is expected to replace Qatar as the world's largest LNG
exporter around 2020. Behind Australia's high interests in the Japanese situation is the fact that
security of demand for LNG is growing more important for Australia for three reasons -- (1) thatJapan's possible restart of nuclear reactors and future best energy mix policy could greatly affect its
LNG demand, (2) that the Japanese government and private sectors are seeking to procure LNG at
more competitive prices, and (3) that new LNG supply projects in the United States, Canada andRussia are expected to become key competitors for Australia. The fact became a focus of discussions
at the conference due to the Australian challenge of how to improve the competitiveness ofAustralian LNG projects featuring rising costs.
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○Second, I would like to note that energy conditions in Australia as well are changing
dramatically. Australia saw the first government change in six years when Liberal Party leader Tony
Abbott became prime minister upon the conservative coalition's victory in a general election thisSeptember. Under the new Abbott government, discussions have become active on energy andenvironmental policy revisions. During the Brisbane conference, parliamentary deliberations started
on a measure to repeal a carbon tax introduced by the previous administration. The measure became
one of key topics at the conference. Among matters attracting attention in Australia include climatechange policy including the carbon tax, electricity and gas price hikes and problems involving
renewable energy diffusion. These matters were key topics for the Australian side's presentations atthe conference.
Participants in the conference pointed to emerging Australian energy problems as follows.
Australia, though remaining a net energy exporter through coal and LNG exports, has seen a fast risein its dependence on oil imports. In 2012, it depended on imports for 55% of its oil supply. It is theonly member of the International Energy Agency that has failed to meet an IEA obligation to hold 90
days of net oil imports in reserve. Given the abovementioned matters, calls have emerged forrevising Australia's energy policy on a full-fledged basis. Some conference participants noted thatmoves for the revision have started.
Third, it was interesting for me to see conference participants discuss global and regionalsituations surrounding Japan and Australia from various angles. Specific issues for discussions there
included international energy situation changes under the shale revolution, their impacts on the twocountries, a rise of China and its implications for the two countries on international political,
economic, geopolitical and energy situations, and future U.S. foreign and energy policies and theirimpacts on the two countries. They are important issues that the two countries cannot shrug off.
Many participants acknowledged that Japan and Australia should deepen discussions on the wide
range of issues. Particularly, discussions on the two countries' relations with China and the UnitedStates attracted my attention because the relations are critically important for political, economic andenergy areas in Japan and Australia.
It was significant that Japanese and Australian participants in the two-day conference
recognized the presence of various challenges regarding energy in Japan and Australia andexchanged views on how best to deepen bilateral energy relations and cooperation. Japan seeking
security of energy supply has a mutually complementary relationship with Australia pursuing
security of energy demand. It is important that Japan and Australia have deepened theirinterdependent relationship in energy trade through long-term efforts by their relevant stakeholders
and have recently enhanced their energy investment relationship as well. The two countries havebecome indispensable for each other for their sustainable development. Japan and Australia will haveto maintain and enhance their existing relations which have been deepened so far and strengthen ties
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○in new areas (including energy conservation and renewable energy) while exploring their needs andstrengths. The two countries have both joined the OECD (Organization for Economic Cooperationand Development) and IEA, share various common values and are U.S. allies. I hope that Japan andAustralia will leverage their deepening energy relations to go ahead with higher-level bilateraldialogue.
Contact: report@tky.ieej.or.jp
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