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ECONOMY > Energy

Major resource development companies shifting away from oil-centered business

  • June 25, 2018
  • , Nikkei , p. 5
  • JMH Translation

Major Japanese resource development companies are shifting away from their conventional petroleum-centered business models. The Japanese Petroleum Exploration Co. (JAPEX) is considering building a new power plant using LNG to generate electricity. INPEX Corp. will begin a survey for a wind power generation project in the current fiscal year. Amid the global trend of moving away from petroleum, Japanese companies, which have lagged behind their European peers so far, are now eyeing power generation using renewable energy as a new source of revenue.

 

JAPEX is considering building new thermal power plants using LNG as fuel in Soma City, Fukushima Prefecture, and elsewhere. The construction of an LNG power plant with a capacity of 1.18 million kilowatts has already begun with a target date for starting operations in 2020. Another power plant with a maximum capacity of 1 million kilowatts is also being planned nearby.

 

JAPEX will look for partners among trading firms and power companies for joint development of new power plants, targeting bulk customers in the Tokyo metropolitan area. The implementation of its plans will entail investment of up to 100 billion yen.

 

JAPEX plans to raise the ratio of non-oil power generation in overall operating profits from the current nearly zero to 40%. It will rush the construction of new power plants to develop them as one of its core projects.

 

INPEX will engage in wind power generation on land in the Tohoku region. It will conduct a one-year survey in FY18 to identify windy locations with consistent conditions. It will lease land from the local governments to set up wind turbines for the survey.

 

Its plan for the future is to set up new wind power generation facilities with a total capacity of 10,000 kilowatts with three business partners, including new power companies. Upon acquiring the necessary expertise, it also plans to expand into Taiwan and other Asian markets.

 

INPEX will also strengthen its geothermal power generation business. It plans to make a decision on investing up to tens of billions of yen by FY22. Since geothermal power generation involves pumping hot water from underground to produce steam, it will be able to utilize its exploration and drilling technology acquired from oil exploitation. INPEX is hoping for a synergistic effect with its other existing businesses to maximize profits.

 

In terms of renewable energy, INPEX currently only operates one solar power generation plant in Niigata and a geothermal plant that started operation in Indonesia in 2017, both of which generate practically no profits at this point. However, it has begun to seriously invest business resources, setting up a renewable energy division in October 2017 and increasing personnel by 40% to 30, in order to make its business ventures more profitable.

 

Under the basic energy plan compiled by the Ministry of Economy, Trade, and Industry, the ratio of renewable energy in the energy mix will be increased from 15% in FY16 to 22-24% in FY30. INPEX and others are developing renewable energy in light of moves based on this policy.

 

The financial markets are also beginning to realize that underground oil resources run the risk of becoming “stranded assets” with no hope of recovering investment. Japanese companies are now aiming to establish income structures that do not rely on petroleum in light of such concerns among investors. (Slightly abridged)

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