The earthquake in Japan last week caused monumental damage, including a death toll that as of March 16 stood at 4,164, with as many as 12,000 unaccounted for.
Headline news has focused on the nuclear emergency that resulted from reactors that were damaged by the tsunami that followed the earthquake and the team that has undertaken the task of stabilizing them.
Japan historically has had a heavy reliance on imported fuel. One of the most significant motivators for the country’s involvement in World War II, in fact, was to annex areas with oil. When Japan was rebuilt following WW II, the country began looking into nuclear energy. Since 1973, nuclear energy has been a national strategic priority in Japan. Seven new nuclear reactors were opened in 2008, making Japan the third largest nuclear power user in the world with 53 nuclear reactors. These nuclear reactors provide 34.5% of Japan’s electricity.
While the story about managing a potential meltdown is indeed dramatic, there is a much more pedestrian issue to be considered. Japan is a developed country that runs on energy for residences, transportation, and industry. With the loss of electricity from the nuclear plants, Japan needs a way to produce electricity, and it needs gasoline to fuel the fleet of vehicles that will provide the necessary logistics to contend with the aftermath of this natural disaster.
In a statement to the media, Shell CFO Simon Henry said the damage done to the country’s nuclear facilities would likely mean higher near-term LNG prices. In a Dow Jones article published Tuesday, March 15, Shell CEO Peter Voser said the company would make provisions to help Japan with its fuel needs.
Other energy companies have done the same.
The Wall Street Journal reported that Chevron had booked a cargo of Indonesian Minas crude to go to Japan. And Reuters published an article on March 16 stating that South Korea’s four oil refiners plan to supply more than 2 MMbbl of oil products sought by Japan to plug an output gap. Korea’s SK Energy committed to buy crude oil to help make up the loss inside Japan of approximately one-third of its 4.5 MMb/d refining capacity resulting from damage to Japanese refineries.
The Rafo Shimpo, Los Angeles Japanese Daily News, said the Japan Ministry of Foreign Affairs reported Monday that the country has received offers of assistance from nearly 100 countries and international organizations.
According to the report, Prime Minister Naoto Kan discussed Japan’s situation in telephone talks with US President Barack Obama, South Korea President Lee Myung-bak, and Australia Prime Minister Julia Gillard.
So far, The Rafo Shimpo reports, 91 countries and regions as well as six international organizations have expressed their intentions to extend assistance.
Many countries, agencies, and organizations have offered aid in some form, including ExxonMobil, which is donating $1 million to the Japanese Red Cross Society and has implemented a worldwide program to match employee, retiree, dealer, and distributor donations to Japanese disaster relief, up to a further $2 million.
But it is energy Japan will need most to get back on its feet. And it is energy companies like Shell, Chevron, and SK Energy that are already in the throes of speeding up that process.
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