[Conference Papers] [日本語版]
This paper is submitted to ROLES for the Panel VIII: Energy Transitions and a Clean Future: Opportunities for Japanese Collaboration with the Middle East" of the 1st Japan-Middle East Strategic Dialogue on May 12 and 13 in Amman, organized and hosted by the Center for Strategic Studies of the University of Jordan in cooperation with ROLES. Views expressed are author's own, not representing any conclusion or consensus of the conference or any views of organizations.

The Common Vision for a Realistic Energy Transition

The most crucial aspect for energy cooperation between Japan and the Middle East is the ability of both sides to share a unified vision for energy transitions. Since the 2020s, Middle East oil-producing countries, such those in the Gulf Cooperation Council (GCC), along with developed nations including Japan, have set net-zero targets and are beginning to aim for significant energy transitions. When discussing energy transitions, particularly in Europe, the focus is often on a rapid and dramatic shift to renewable energy sources. Although Russia's invasion of Ukraine has reaffirmed the importance of oil and gas security, there remains a strong demand for energy transitions through the large-scale development of solar and wind power. For instance, the RePowerEU, published in May 2022 by the European Commission, seeks to reduce dependency on Russian fossil fuels by improving energy efficiency and introducing substantial renewable energy capacity. However, such a radical transition is only achievable in Europe, which is connected to neighboring energy-producing regions and countries through extensive electricity and gas infrastructures. Therefore, other regions will need to establish their own visions and pathways to energy transitions.

 

Japan and the Middle East can share a vision of a realistic, progressive, and inclusive energy transition. This vision encompasses all possible energy sources, including fossil fuels and nuclear power, at least in the short to medium term. Japan and the Middle East have a common need for fossil fuels such as oil and gas, despite being on opposite sides of the energy market. Saudi Arabia, the United Arab Emirates, and other Middle Eastern countries possess vast oil and gas reserves and have incentives to maximize energy exports to maintain a 'rentier state' mechanism. In this system, the central government distributes oil and gas revenues to citizens to ensure regime stability. Conversely, Japan has extremely limited domestic energy sources and relies on imported resources for nearly 80% of its energy consumption, primarily oil and gas imports from the Middle East. This interdependence is unlikely to change in the near future, even with the growing trend towards energy transitions.

 

Each country is already working to achieve its own vision for energy transition. Saudi Arabia has successfully initiated the key concept of a ‘Circular Carbon Economy’ at G20 in 2020. Circular Carbon Economy includes the principles of Reduce, Reuse, Recycle and Remove carbon, providing a technical solution to utilize hydrocarbons without CO2 emissions. This concept effectively counters the fossil-free energy transition approach of European countries. Japan, on the other hand, takes a stance of accepting diverse energy transition pathways, despite its membership in the G7, which is gradually leaning towards phasing out fossil fuels. Japan has established frameworks such as the Asian Zero Emissions Community (AZEC) and collaborates with Southeast Asian countries to share its technology and expertise, including as coal-to-gas switching.

 

Efforts towards energy transitions will become most effective if Japan and the Middle East collaborate to promote their visions to the international community, particularly to European countries that advocate for a drastic shift toward renewables. To this end, Japan and the Middle East should demonstrate their ability to implement commercial projects that embody this common vision. Key technologies in this cooperation include hydrogen utilization technology and carbon capture, utilization, and storage (CCUS) technologies.

 

First, Japan is one of the world's earliest developers of hydrogen utilization technology. Various companies, including Toyota and Nissan in the mobility sector, Panasonic in fuel cells, and JERA, Kawasaki Heavy Industries, and Mitsubishi Heavy Industries in power generation and shipping sectors, are actively working to develop hydrogen utilization. Hydrogen utilization is not only useful for establishing a hydrogen supply chain between Japan and the Middle East but also contributes to the creation of a hydrogen ecosystem within Middle Eastern countries. It is expected that many of the world's hydrogen projects will be initiated locally, where project operators can easily secure sufficient demand. Hydrogen export projects planned in Middle Eastern countries are more likely to be commercially successful if the hydrogen can also be used locally. Thus, this technology will enhance the Middle East’s position as a powerful energy producer.

 

Second, CCUS (Carbon Capture, Utilization, and Storage) is an essential technology for producing blue hydrogen, which is derived from fossil fuels with minimal CO2 emissions. Middle Eastern countries are already considering CCUS by storing CO2 underground within their landmass.

Japanese companies are also seeking business opportunities in CCUS. For example, Japanese shipping company K-Line will provide CO2 carriers for the Northern Lights CCS project, the world's first commercial CCS project in Norway. JGC Corporation is actively developing membranes for CO2 separation and capture. This technology, which allows the use of hydrocarbons without CO2 emissions, embodies the vision of a realistic and inclusive energy transition shared by Japan and the Middle East. Therefore, such cooperation should be encouraged more from a political and diplomatic perspective to promote energy transitions that are viable for Japan, the Middle East, and the rest of the world.

 

Another critical point is that Japan and the Middle East can create equal and mutually beneficial business cooperation, rather than just a one-way technology transfer. Middle Eastern countries are developing their own hydrogen and CCUS projects and have already begun accumulating business experience in these areas. Japan's involvement allows both sides to learn from each other's expertise, demonstrating that a realistic energy transition is a viable vision that engages and benefits a range of business stakeholders. By linking their respective assets, Japan and the Middle East can clearly demonstrate to the international community that a realistic and comprehensive energy transition is technically and commercially feasible.

 

Energy cooperation between Japan and the Middle East is undergoing a structural shift in this era of energy transitions. Traditionally, Japan and the Middle East have formed a ‘market interdependence’ through long-term oil and gas trade. Middle Eastern countries, particularly Saudi Arabia and the UAE, have secured substantial energy income by supplying oil to Japan. However, this interdependence is losing importance due to declining energy demand resulting from Japan's shrinking population and economic scale.

 

However, in the new environment of energy transitions, they can strengthen their ‘technological interdependence.’ Middle Eastern countries can gain technological expertise in the fields of clean energy, while providing business opportunities for Japanese companies. Additionally, Japanese companies can offer technologies that align with the shared vision of a ‘realistic, progressive, and inclusive’ energy transition. In other words, a common vision towards energy transitions can be embodied through technical cooperation. The energy transition represents a turning point in the relationship between Japan and the Middle East, evolving from a transactional relationship based on the oil and gas market to a partnership founded on technology and a shared vision for energy transitions.