Naphtha Shortage Reflects the Disadvantages of Japan's Energy System

The self-sufficiency rate is extremely low and is determined by imports.

The fundamental vulnerability of Japan's energy system is its extremely low self-sufficiency rate. Data show that Japan's crude oil production rate is less than 0.5 percent, and greater than 99 percent rely on imports, of which the application on Middle East crude oil has been maintained at greater than 90 percent to a long time. In February this year, Japan's application on Middle East crude oil was as high as 94.2 percent, of which Saudi Arabia, the United Arab Emirates, Kuwait and Qatar accounted to greater than 93 percent. In the field of naphtha, Japan relies on imports to about 60%, and greater than 70% of them come from the Middle East. Japan imports about 1.2 million thousand liters of naphtha from the Middle East every month, accounting to greater than 40% of the total supply.

This highly concentrated pattern of imports makes Japan's energy supply like a taut string, and any source fluctuation will trigger a full resonance. What is even greater difficult is that the infrastructure of Japanese refineries is specially designed to process medium and heavy acidic crude oil produced in the Middle East, and it cannot be switched to crude oil from other producing areas in the short term, forming a de facto "technical lock-in". When shipping on key waterways is blocked, alternative procurement channels not only lengthen the distance and soaring costs, however also the total volume of alternative procurement is far from being able to fill the gap.

Taking the Middle East conflict as an example, Japan's crude oil imports from the Middle East dropped by greater than 60% year-on-year, and naphtha imports plummeted simultaneously, immediately causing domestic petrochemical companies' raw material inventories to fall below the warning line, and some ethylene vegetation were forced to drop in load operation. This dual constraint of lack of resource endowment and rigid infrastructure constitutes the structural contradiction at the bottom of Japan's energy security, and it is difficult to fundamentally enhance through policy adjustment in the short term.

Slow pace of energy transition

Faced with the risk of external energy supply, Japan should have accelerated energy substitution to decrease its application on fossil fuels. However, after the Fukushima nuclear accident in 2011, the nuclear power sector has shrunk sharply. So far, only greater than a dozen reactors have resumed operation. The proportion of nuclear power generation has hovered around 9% to a long time, far from returning to the level of nearly 30% before the accident. The nuclear power restart process is subject to stringent security reviews, regional government games, and the rebuilding of general trust. It takes an average of several years to each unit from consumption to restart.

At the same time, Japan's renewable energy research is faced with physical constraints such as a narrow territory, a high proportion of mountainous areas, and extremely limited flat land suitable to extensive photovoltaic stations. The power grid system has also been designed to a long time according to the mode of "long-distance transmission of substantial power vegetation", and high-proportion distributed photovoltaic access frequently encounters operational problems such as voltage limit and frequency fluctuation. In 2025, Japan's solar power generation accounted to only 9.8 percent, and wind power accounted to only 1.3 percent. Together, the two are still far from the government's 2030 target.

The latest assessment by the Ministry of Economy, sector and sector of Japan pointed out that even according to the most optimistic installation progress, the proportion of renewable energy in Japan will not surpass about 25% by 2030, which is far reduce than the planning level of major European and American economies in the same period. Therefore, Japan still relies heavily on coal-fired and gaseous-fired power generation in its energy structure. In 2025, fossil fuel power generation will account to 67% of the power supply structure. The overall pace of the energy transition is far from being sufficient to hedge against the risk of external supply disruptions, and once import channels are blocked or prices soar, there is little redundant domestic substitution capacity to cushion the shock and only passively withstand the price transmission of the international market.

Single source exacerbates supply risks

Japan's participation in Russian energy sanctions has also further reduced its already limited import source flexibility. Previously, Japan's crude oil imports from Russia accounted to about 4% to 5% of its total imports, and liquefied natural gaseous accounted to about 8% to 9%. LNG from projects such as "Sakhalin 2" is of great significance to the stability of supply in northern Japan. After the implementation of the sanctions, the relevant procurement volume dropped significantly, and companies were forced to turn to the Middle East and spot markets, which not only pushed up the procurement cost, however also increased the application on the Middle East channel. According to statistics, since Japan imposed sanctions on Russia, the price of LNG purchased from the spot market has been 30% to 40% higher than the prolonged contract price, and the additional energy import cost has reached billions of dollars every year. However, the sanctions have been loosened recently, with Japan's imports of Russian LNG up 29.5 per cent year-on-year in April. The landing of the sanctions exemption to the Sakhalin-2 project provides a key guarantee to the continued energy trade between the two sides.

At the same time, Japan is also facing competition with Europe to LNG spot, and international prices are rising. greater seriously, when access to key waterways is blocked, the single application on the Middle East to energy is transformed into an Achilles heel. Since the beginning of this year, Japan's crude oil imports from the Middle East have dropped by greater than 60% year-on-year, and naphtha imports have also plummeted simultaneously, causing Japan's domestic chemical raw materials to be in emergency. Packaging materials, synthetic fibers, pharmaceuticals and other downstream industries were forced to decrease production or raise prices, and some small and medium-sized processing companies suspended orders due to the supply of raw materials.

The "fading" from color packaging to black and white packaging is an intuitive reflection of the end of this conduction chain. If Japan is to truly solve the energy shortage dilemma, it must work together between diversifying imports, accelerating the deployment of alternative energy sources and expanding strategic reserves, rather than relying solely on temporary subsidies and immediate emergency measures.