March's Japanese earthquake, tsunami and resulting nuclear contamination at the Fukushima power plant spawned a disaster that will be hard to remedy or forget. As usual the events have had a number of dimensions, mostly unfortunate for that country no matter how developed and prosperous it has been, no matter how stoic and expectant the population may have grown from past experiences in natural or even man-made calamities.
Japan's misery becomes Australia's opportunity of the century, staring the country in the face with a sense of urgency. Australian natural gas is the obvious energy source to be marshaled by Japan in both the immediate and the long-term future.
The Japanese reactor meltdown brought about an even bigger meltdown in public perception of nuclear power, which was barely showing some signs of life after decades following the accidents at Three Mile Island and Chernobyl. There has not been a new nuclear power plant in the United States in 30 years.
Now, Germany and other European countries that had been planning a new generation of nuclear reactors have either scrapped these plans or stated they wish to ‘study' them more. China and many other countries have announced their intentions to reevaluate the role of nuclear power generation.
For Japan the situation is even starker and will create a new reality in the entire Australasian region, affecting natural gas trade and natural gas production.
Of more than 1000 billion kWh of electricity generated in Japan each year, 27% came from nuclear power plants, with a total of 51GW of installed capacity. The Fukushima reactors with a total capacity of 4.4GW contributed about 2.2% of Japanese electric power production.
Natural gas on the other hand also provides about 27% of Japanese electric power generation. While before the accident the Japanese, ever mindful of emissions, were talking about increasing nuclear's contribution to 37% before the end of the decade, the recent events will create an incremental need of natural gas according to my estimations of at least 12% of projected electricity needs, taking into account the shortfall from the Fukushima plant.
Japan currently uses about 3.5tcf of natural gas of which 3.3 is imported in the form of liquid natural gas. The overwhelming portion of this is used for power generation. LNG imports must now escalate to over 4.8tcf to meet the new power market share from natural gas, which I expect to climb to 39%.
The incremental 1.5tcf of gas translates to an increase in LNG imports of 27 million tonnes per annum (MTPA) of LNG trains. That is equivalent to just under half the current Qatar LNG capacity, but is 1.35 times the current Australian capacity of a little over 20mtpa.
And yet the Japanese opportunity for Australian gas, born in the recent misfortune, pales in comparison to Chinese prospects.
Currently, China uses 3.3tcf of natural gas, of which more than 95% is produced domestically. This though accounts for less than 4% of its total energy demand, with coal providing more than 70%. This kind of energy mix, with all the resulting horrible environmental malaise, has not been seen in the developed world since the nineteenth century.
The Chinese government has already decreed that by 2020 the natural gas share of the nation's energy mix should climb to 10%. Depending on which estimate of total Chinese energy demand by 2020 you use, this would translate to 10.6-12tcf of natural gas.
Such an ambitious plan, while acknowledged by the Energy Information Administration of the US Department of Energy in its July 2010 International Energy Outlook, is considered just that, an ambition. And the EIA estimate of Chinese natural gas consumption by 2020 is a modest 6.3tcf.
Of course no matter which of these estimates materializes it will amount to a huge elevation in the demand from international supply, anywhere from 3-9tcf of incremental natural gas. Other than sketchy shale gas, China does not come close to have any large domestic resources. China's needs would dwarf any Japanese demand: as a good measure, the larger figure is about eight times current Australian LNG production.
How much of this demand can Australia actually meet? Does the Australian government act as if it understands the magnitude of this challenge?
These are clearly critical questions, because there is no other nation that has enough resources to actually compete credibly in this massive venture and at the same time maintain its environmentalist and regulatory sensibilities. To find a compromise will be the defining Australian socioeconomic and political issue of the next several decades. OE
About the Author
Michael J Economides is a professor at the Cullen College of Engineering, University of Houston, and editor-in-chief of the Energy Tribune. The views expressed in this column do not necessarily reflect OE's position.
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