If ever there was a country that was vulnerable to energy shortages, it must be resource-poor Japan. But not for much longer.
It is in the process of building a national network to pipe natural gas, fueling hopes of industry shifting to a commercially cheaper and more environmentally friendly source of power.
The next step is to connect the cities of Shizuoka and Hamamatsu, which have combined populations of 1.5 million and are a hub of industrial manufacturing.
That section, called the Shizuhama Pipeline, is due for completion next year. After that, the pipeline will be extended to other parts of Shizuoka Prefecture.
As the price of natural gas is lower than that for oil, and produces less carbon dioxide emissions, local companies and others see a bonanza in the making: specifically, huge savings in fuel costs and greener business operations.
Some 30 meters below ground level in Shizuoka's Suruga Ward, workers in a tunnel 2 meters wide weld together segments of a gas pipe 50 centimeters across. It will eventually reach Kusanagi Sports Park, about 500 meters to the east, where it will link up with another gas pipe extending from Shimizu Ward, on the east side of the park.
The Shizuhama Pipeline will be 105 kilometers in length and connect the Shizuoka Gas Co. liquefied natural gas (LNG) complex on its eastern end in Shimizu Ward with gas tanks owned by Chubu Gas Co. on the western end in Hamamatsu.
The two gas utilities have jointly invested 35 billion yen ($446.6 million) in the project. Construction began in 2009, and 70 percent of the pipeline has been completed.
For the moment, LNG tanker trucks transport the fuel from the Shizuoka Gas LNG complex to the Chubu Gas gas tanks. When the pipeline is completed, it will free up the companies to send a huge volume of natural gas between the two sites. The sharp cut in transportation costs will let Chubu Gas sell cheaper gas to a great many client firms.
Shizuoka and Hamamatsu encompass one of Japan's great industrial hubs. It is an area with a huge concentration of large factories run by auto parts makers, food processing companies and other enterprises.
With skyrocketing oil prices in recent years, companies are adopting greener policies and turning to natural gas, which is cheaper than oil and more friendly to the environment.
Increasingly, they are switching from conventional fuel oil to natural gas for melting metal and plastic materials for parts, as well as to cook food.
The Shizuhama Pipeline is expected to accelerate this trend.
Chubu Gas, citing last year's earthquake and nuclear disasters, is convinced that natural gas makes more economic sense for companies and is encouraging local firms to make the switch.
Natural gas has also caught the attention of Suzuki Motor Corp., which is headquartered in Hamamatsu and has four factories in the area. A company representative said that while Suzuki Motor does not have plans at present to switch over, "we will consider using natural gas if the price is right."
Construction is also under way on the Minami Enshu Pipeline, which will branch off from the Shizuhama Pipeline to connect the cities of Fukuroi and Kakegawa, thus expanding the supply network across a vast stretch of Shizuoka Prefecture.
The new Shizuhama Pipeline will connect the Tokyo and Chukyo (Nagoya) metropolitan areas.
Meantime, Chubu Electric Power Co. and Osaka Gas Co. are building a pipeline between Shiga and Mie prefectures that is slated for completion in 2014 and will connect Tokyo with Osaka.
Areas within the expanded gas pipeline network will be able to cope better in the event of a natural disaster. When an LNG complex in Sendai was crippled by the Great East Japan Earthquake in March last year, the pipeline connecting the city to Niigata Prefecture provided the Sendai area with a stable supply of gas with unprecedented speed.
This past June, Shizuoka Gas reached an agreement with Tokyo Gas Co. and Inpex Corp., which operates LNG complexes in the Tokyo area, to lend each other gas if a disaster strikes.
"We'll be able to deal with the risk of gas supplies being cut off in Shizuoka, where we have to prepare for a Tokai earthquake," said a spokesperson for Shizuoka Gas. "Plus, it'll be something that will appeal to corporate clients."
There is also the prospect of gas companies getting caught up in "price wars," according to an industry insider.
There are 209 gas and gas-related companies across Japan, each monopolizing the supply in their respective areas. However, rates billed to customers differ by area because of varying procurement costs for natural gas.
As the pipeline network extends nationwide, customers will be able to sign contracts with companies selling cheap gas, which could break up the local monopolies.
For example, companies in Shizuoka Prefecture may start buying gas from faraway firms in Tokyo or Osaka.
The Ministry of Economy, Trade and Industry has set up a committee of experts to examine the ramifications of expanding the pipeline network.
"A big problem is who is going to pay for costly construction in areas with few (natural gas) users," said a ministry official. "But with the entire country connected, gas prices could be lowered. And that would be to everybody's benefit."
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