Training Program to Support Renewable Energy Deployment through Developing Project Proposals to Access Climate Finance

Japan’s Energy Diplomacy

23 October, 2017

Atsushi Suda Principal Deputy Director,

Economic Security Division, Ministry of Foreign Affairs, Japan

After the oil shocks of 1970’s, Japan sought to decrease the fossil fuel dependency through improving energy efficiency and decarbonisation (promoting renewables and nuclear energy).

However, after the Great East Japan Earthquake, fossil fuel dependency in power generation rose to 86% in 2014 (compared to 62% in 2010), due to shutting down of the nuclear.

2

Petroleum

Coal

Natural Gas

Nuclear energy Hydro energy

Renewable energy

4%

3%

0%

25%

26%

41% 【1973】 Dependence percentage

on fossil fuels in 1973 (the 1st oil shock)

94% 【1998】 The lowest dependence percentage after the oil

shocks 79.9%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

石炭 石油

天然ガス 原子力

水力 再エネ（水力除く）

火力発電比率

Share of electric power supply （2010～2014） Share of the primary energy supply（1954～2014）

Ⅰ. General Overview – Japan’s energy mix

The new method of calculating was applied after 1990s

2010 2011 2012 2013 2014 2015(P)

Coal

Natural gas

Hydro

Thermal

oil

Nuclear

Renewable

１

Trade Statistics of the Ministry of Finance of Japan

Total ： 3.37 million barrels/day Total ： 88.05 million MT/year Total ： 191 million MT/year

I. General Overview - Oil, Gas and Coal Imports by Source（2015）

Rate of dependency on Hormuz

0%

Coal Oil Gas

Australia, 65%

Indoneshia, 17%

Russia, 9%

Canada, 4%

US, 3% China, 1% Others, 1%

Saudi Arabia, 33%

ＵＡＥ, 25% Qatar,

8%

Kuwait, 8%

Iran, 5%

Iraq, 2%

Oman, 1% Russia, 9%

Indoneshia, 2%

Others, 7%

3

Australia，

22%

Malaysia，

18%

Qatar，

17%

Russia，

9%

Indonesia，

7%

UAE，

6%

Nigeria，

6%

Brunei，

5%

Oman，

3%

Others，

7%

２

High import dependency requires diplomacy Approximately 90% of primary energy and

most of the key minerals are imported Open and transparent global energy market is

a cornerstone for Japan’s energy security

Need to ensure safe transportation of energy and minerals (seaborne trade)

Addressing climate change by realizing low-carbon society

Contribution to innovation and technology development in the world

Increasing energy demand in emerging economies (especially China and India)

Increasing energy export from new sources after the shale revolution (especially US and Canada)

Increasing pressure for decarbonisation to address the climate change

Need to create a better functioning global energy market for “3E + S”

Japan’s Energy Diplomacy

Japan’s Viewpoints Global Viewpoints

II. Japan and the world – connecting the challenges and opportunities

4

1. Global Vision Facilitating free trade and investment in energy and minerals globally Promoting open and transparent market for energy and minerals Improving energy access in the world Minimizing the environmental cost Improving energy efficiency and promoting new energy and renewables Strengthening emergency preparedness for oil and gas internationally Strengthening global energy governance

2. Strategy 3. Measures

Energy Security Economic Efficiency Environment Safety

３

Oil demand is expected to increase by about 9.6million barrels per day (compared to 2014) by 2040. Sharp decline in upstream investments over the previous two years are signs of concern.

Despite the tight oil (including shale oil) production increase in the US, supply by non-OPEC countries will decrease after 2020. Conversely, the share of OPEC countries is expected to rise to about 50% in 2040.

Source：IEA World Energy Outlook 2015 5

Forecast of the oil production （2000－2040）

mb/d

OPEC Non-OPEC Share of OPEC at end of interval (right axis)

2000 -2005

2005 -2010

2010 -2015

2015 -2020

2020 -2025

2025 -2030

2030 -2035

2035 -2040

10%

20%

30%

40%

50%

- 2

0

2

4

6

8

10

0%

III. Three shifts in global energy landscape – Shift in supply ①

４

Ch

ange

in n

on

-OP

EC &

OP

EC o

il p

rod

uct

ion

b

y fi

ve-y

ear

per

iod

s

20

25

30

35

40

45

50

55

60

65

70

75

80

85

90

95

100

105

110

115

120

125

130

135

140

145

150

Brent Oil Index

WTI Oil Index

Continuing high price due to the geographical risks

Declined sharply

Skyrocketed

Dec 2008 Lowest Price：33$/b

Aug to Sep 2013 Concerns on possible military intervention by the USA and EU over the suspected use of the chemical weapons in Syria

Jan 2013 Hostage Incident in Algeria Anti-governmental demonstration in Egypt

Winter 2013 to Spring 2014 Ukraine Crisis (Russia) Supply Disruption in Libya and Iraq

Sep 2008 Bankruptcy of Lehman Bros.

Late 2010 to early 2011 “Arab Spring” occurred Since Mar 2011 Oil supply from Libya was disrupted

Jan 2011 IEA Co-ordinated Emergency Response Measure to the unstable situation of Middle East (such as Libya)

Jul 2012 Embargo by EU on oil from Iran

Jan 2014 The Islamic State attacked northern region of Iraq Since Aug 2014 US-leaded air striking, military operation against the Islamic State started

Feb 2016 Lowest Price：26$/b（ＷＴＩ），27$/b（Brent）

III. Three shifts in global energy landscape – Shift in supply ② Nov 2011 The relation between the USA and Iran tensed, after enforcement of the National defense Authorization Act of the USA.

Jul 2008 Record Highest Price： Brent 146.08$/b WTI 145.29$/b

Nov 2016 OPEC GA accord on curtail oil production

6 ５

III. Three shifts in global energy landscape – Shift in supply ③

６

IV. Three shifts in global energy landscape – Shift in demand

OECD share of world primary energy demand is declining, while the share of non-OECD emerging economies are increasing. The center of global energy consumption is shifting towards non-OECD countries

Gobal demand of primary energy is projected to rise by about 31% (2014 to 2040) . Especially the share of non-OECD members such as China and India will increase. Japan’s share is expected to decline to 2.1%(2040) from 3.2%(2014).

【Share of oil demand among main consumer countries（2014 to 2040】 【Demand on primary energy (2014 to 2040)】

Source: IEA

Millio

n M

T (Oil e

qu

ivaren

t)

The Share of OECD countries down to 28% (2040) from 39%(2014)

8

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

1990 2014 2020 2025 2030 2035 2040

中国

インド

ＯＥＣＤ

アジア（非ＯＥＣＤ）

中東・アフリカ・南米

東欧州・ユーラシア

世界全体

North America

North America

China

China

India

India

Europe

Other Asia Countries

Latin America

Africa

Africa

Middle East

Latin America 5%

Other Asia Countries

East Europe Region

Eastern Europe Region 7%

Russia

Russia 4%

Middle East 7%

Europe

Asia/ Oceania

Asia/ Oceania

Ｃｈｉｎａ

Ｉｎｄｉａ

ＯＥＣＤ

Asia(nonOECD)

Middle East, Africa, Latin America

Eastern Europe

Whole World

７

Source: Agency for Natural Resource and Energy 9 ８

V. Three shifts in global energy landscape – Shift for low-carbon ①

V. Three shifts in global energy landscape – Shift for low-carbon ②

９

V. Three shifts in global energy landscape – Shift for low-carbon ③

10

４．Information Gathering and Analysis on Resources by Japanese Embassies

・Assigned ”Experts on Energy and Mineral Resources” (73 officials, at 55 Embassies and Consulate-Generals in 50 countries) ・Holding ”Strategic Conference on Energy and Mineral Resources” with the participation of experts every year.

１．Strengthening Comprehensive and mutually-beneficial Cooperative Relationships with Resource-producing Countries

・Strategic utilization of high-level visits ・Constant and multi-faceted efforts by Ambassadors stationed in these countries ・Strategic use of ODA and improving investment environment through Bilateral Investment Treaties and EPA/FTA

２．Utilization of International Organizations and Forums

・Promoting international cooperation to create sound market environment including the improvement of market transparency. ・Enhancing emergency response mechanisms, through the IEA, to respond to supply disruptions

３．Enhancing Safety and Security of Transportation Routes

・Operating Regional Cooperation Agreement on Combating Piracy and Armed Robbery against Ships in Asia (ReCAAP) and employing “Cooperation Mechanism” on the Safety of Maritime Navigation in the Straits of Malacca and Singapore ・Enhancing cooperation to each country’s maritime safety authority as well as the Japan-U.S. cooperation on security including maritime security

VI. Japan’s efforts to ensure stable and affordable supply

12 11

●In face of the challenge both home (increasing fuel costs after the Great East Japan Earthquake) and abroad (intensifying competition on access to stable energy resources) , MOFA assigned the “Experts on Energy and Mineral Resources” in Feb 2013 in the Japanese embassies and consulates (56 officials in 50 countries so far).

●The experts are expected to advance diplomatic efforts to ensure stable and affordable supply of energy and mineral resources, including information gathering and analysis on resources and supporting the private companies and bodies concerned operating on the local base.

【European region】（６） ・Embassy in Azerbaijan ・Embassy in Uzbekistan ・Embassy in Kazakhstan ・Embassy in Kirghiz ・Embassy in Turkmenistan ・Embassy in Russia

【Middle East region】（６） ・Embassy in UAE ・Embassy in Iraq ・Embassy in Oman ・Embassy in Qatar ・Embassy in Kuwait ・Embassy in Saudi Arabia

【Africa region】（１７） ・Embassy in Algeria ・Embassy in Angola ・Embassy in Ghana ・Embassy in Gabon ・Embassy in Guinea ・Embassy in Democratic Republic of the Congo ・Embassy in Zambia ・Embassy in Zimbabwe ・Embassy in South Sudan ・Embassy in Tanzania ・Embassy in Burkina Faso ・Embassy in Botswana ・Embassy in Madagascar ・Embassy in Malawi ・Embassy in South Africa（Namibia）

・Embassy in Rwanda ・Embassy in Mozambique

【North America region】（４） ・Embassy in the USA ・Consulate in Houston ・Embassy in Canada ・Consulate in Vancouver

【Latin America region】（７） ・Embassy in Argentina ・Embassy in Chile ・Embassy in Torinidad and Tobago ・Embassy in Brazil ・Embassy in Venezuela ・Embassy in Peru ・Embassy in Bolivia

【Asia region】（８） ・Embassy in India ・Embassy in Indonesia ・Embassy in China ・Embassy in Philippines ・Embassy in Vietnam ・Embassy in Myanmar ・Embassy in Mongolian ・Embassy in Laos

【Oceania region】（７） ・Embassy in Australia ・Consulate in Sydney ・Consulate in Perth ・Consulate in Brisbane ・Consulate in Brisbane ・Embassy in Solomon ・Embassy in PNG

VII. Global network through diplomatic postings - Experts on Energy and Mineral Resources

13 12

国際エネルギー機関（ＩＥＡ）

International Energy Agency（ＩＥＡ）

IEA was founded in 1974 to help countries co-ordinate a collective response to major disruptions in the supply of oil. Japan has actively been participated in various activities of the International Energy Agency (IEA) for international collaboration and cooperation toward a stable supply of energy. It endeavors to strengthen capability to respond to emergency such as disruption of oil supply, while working to grasp quickly and accurately such information as the trends in the global energy markets, medium- and long-term outlook for supply and demand, and the trends in resource-producing countries 29 member countries (Mexico is now under way to join) Recently it has been promoting the cooperation with outreach members such as China, Indonesia, Thailand and India.

International renewable Energy Agency（ＩＲＥＮＡ）

IRENA is an intergovernmental organization that supports countries in their transition to a sustainable energy future, and serves as the principal platform for international co-operation. IRENA was founded in 2011 aimed at promoting the widespread adoption and sustainable use of all forms of renewable energy, including bioenergy, geothermal, hydropower, ocean, solar and wind energy.

Japan has been contributing to IRENA in order to diversify the

source of energy supply and to raise the percentage of self-supplied energy through expanding the use of renewable energy. Japan acted as the chair of IRENA Assembly in 2015. 150 members (149 countries and EU.)

International Energy Forum（ＩＥＦ）

IEF was founded in 1991 in the wake of the Persian Gulf War. It aims to foster greater mutual understanding and awareness of common energy interests among its members. In addition, it aims to stabilize the energy market through the establishment of the Joint Oil Data Initiative (JODI). Japan has actively been participating in the forum and utilize it as the valuable platform through which Japan at the ministerial level can ask the oil producing countries to secure a stable oil supply at the reasonable price (the consumer-producer dialogue). 89 countries endorsed the IEF Charter, and 72 countries are the current members of the forum.

Energy Charter Treaty（ＥＣＴ）

ECT entered into force in 1998, and it provides a multilateral framework for energy cooperation. It is designed to promote energy security through the operation of more open and competitive energy market. ECT is aimed at promoting the protection of foreign investments, non-discriminatory conditions for trade in energy materials, products and energy-related equipment based on WTO rules, and provisions to ensure reliable cross-border energy transit.

In November 2016, Japan held the “Energy Charter Conference” (hosted by MOFA) and provided an opportunity to promote understanding of the ECT and Japan’s overseas business activities.

Its member includes 48 countries and EU.

VIII. International Organizations and Forum related to Energy

14 13

15

●Ambassadorial Visit to the Fukushima Renewable Energy Institute, AIST (FREA) (Fukushima Study Tour) On Thursday, August 25 in 2016, "Ambassadorial Visit to the Fukushima Renewable Energy Institute, AIST (FREA)" is organized by the Ministry of

Foreign Affairs in cooperation with the National Institute of Advanced Industrial Science and Technology (AIST), Koriyama City, Fukushima Prefecture

and Agency for Natural Resources and Energy, in the presence of the Parliamentary Vice-Minister for Foreign Affairs, Mr. Motome Takisawa. This study tour is aimed at introducing to the diplomatic corps, the "Fukushima plan for a new energy society", which promotes further introduction of

renewable energy and aims at providing a model of a future hydrogen-based society, by presenting related advanced technologies. At this tour, they will visit Koriyama City, Fukushima Prefecture and FERA which is the exclusive official institute in Japan specialized in research for

renewable energy. They will also visit a reconstruction related facility in Koriyama City. 【Note]】Scheduled to visit sites for Fukushima Study TourFukushima Renewable Energy Institute, AIST (FREA)

•Lake Inawashiro (Nagahama Beach, Juuroku Bridge Sluice Gate, and Statue of C.J. van Doorn)

•Fukushima Ouse Winery (from the website of MOFA: http://www.mofa.go.jp/press/release/press3e_000067.html )

●G7 CONNEX Initiative International Conference On Capacity Building and Transparency On September 15(Thursday) and 16(Friday) in2016, the Ministry of Foreign Affairs organized “G7 CONNEX Initiative International

Conference on Capacity Building and Transparency” as a follow-up to the G7 Ise-Shima Summit.

At the G7 Ise-Shima Summit held May 2016, Japan led the discussion and placed CONNEX as one of the global efforts to achieve

the 2030 Agenda for Sustainable Development, focusing on the efforts on capacity building in the developing countries, improving

transparency in extractives industries, and establishing a firm linkage among developing countries with natural resources

investing companies and various international institutions and aid agencies. As a result, the G7 successfully issued the “CONNEX

Guiding Principles towards Sustainable Development”. Based on this achievement, Japan will organize this follow-up conference

to disseminate the results as Chair of the G7 and to further develop discussions on our future efforts.

IX. Sharing knowledge and experiences with the world ①

14

Energy Charter Ministerial Conference（26 November, 2016） Welcome reception hosted by Foreign Minister Mr. Fumio Kishida and the

signing ceremony of International Energy Charter (25 November, 2016) International Workshop (25 November, 2016)

Main Events

Outcomes achieved

１ 69 countries and 9 IOs participated including 32 ministerial participants Unprecedented number of ministerial participation and IOs. 9 out-reach countries and IOs participated from Asia, responding to Japan’s request.

２ Adoption of “Tokyo Declaration on ECT”

Reaffirming that ECT contributes to strengthening “rule of law” in the energy sector Promoting high-quality infrastructure, in line with G7 declaration of 2016 Confirming that ECT provides a legal framework for stability and transparency of investment climate and is conducive to improvement of business environment in energy sector. Reiterating accelerating outreaching activities to welcome more countries to sign IEC and ECT

３ Three countries and three IOs signed IEC

Guatemala, Iran and Iraq, as well as ECCAS, G5 Sahel and EAC signed the IEC

４ Publicly introducing Dr.Masami Nakata, ASG of ECT Secretariat

５ Promoting good understanding of ECT and its usefulness among Japanese

International Workshop and welcome reception provided an excellent opportunity to foster good understanding of ECT among Japanese public

Family Photo of ECT Conference

Signing Ceremony of International Energy Charter

State Secretary Mr.Sonoura at the opening session of Ministerial Conference

Parliamentary vice-Minister, Mr.Takisawa

at the Workshop

IX. Sharing knowledge and experiences with the world ②

15