Japan Oil and Gas Market Report, By Type (Upstream, Midstream, Downstream), By Application (Offshore, Onshore), Market Size, Trends, and Forecast 2024-2032

Market Overview:

"The Japan oil and gas market was valued at US$ 263,560.0 Million in 2023 and is expected to register a CAGR of 2.1% over the forecast period and reach US$ 318,080.0 Million in 2032."

The oil and gas industry are pivotal to the energy sector of Japan as the nation relies entirely on imports for its energy needs. As Japan lacks significant domestic hydrocarbon resources, it imports nearly all of its oil and gas, primarily from the Middle East. Due to such dependence, energy security has become a matter of concern, driving countries like Japan to seek alternative energy sources and build facilities such as liquefied natural gas (LNG) terminals. Japan's one of the world's largest importers of LNG leading to paradigm shift in the market by allowing use of LNG as an environment friendly energy source in place of coal and oil.

In addition, the authorities encourage the low carbon development as part of its international obligations to cut back on the greenhouse gas emissions. As a consequence, domestic gas use and renewable energy sources have seen significant growth in an effort to achieve energy security and sustainability. Oil and gas corporations are also heavily funding clean energy innovations like CCS and H2 technologies so that their business strategies comply with such development.

On top of that, the oil refining companies are modernizing their facilities to manufacture more valuable products and lessen the environmental burden. This drive towards energy efficiency and sustainability is revolutionizing the sector, making it possible for Japan to be more adaptable with regards to global energy issues. With an avowed goal of achieving carbon neutrality by the year 2050, there are overwhelming shifts taking place in the oil and gas market, combining the conventional power generation sources and offering solutions that define the future of energy in Japan.

Japan Oil and Gas Market Trends and Drivers:

There are many key trends and drivers that characterize and that are changing the oil and gas sector in Japan. An important trend has been Japan’s increasing concern over energy security given its import dependence on oil and gas from the Middle East where a majority of its imports are sourced. This has necessitated the diversification of energy sources, in particular, liquefied natural gas (LNG) for its clean burning qualities relative to oil. Japan is the leading importer of LNG in the world and the demand for LNG in the country is on the rise due to a shift away from the use of coal and nuclear power following the Fukushima disaster.

A further catalyst is Japan's resolve to cut carbon emissions and reach the goal of carbon neutrality by 2050. This has led to the enhancement of natural gas in the energy mix along with more focus and funding towards renewable sources of energy and clean technology like hydrogen and carbon capture and storage (CCS). Moreover, the increasing number of energy saving initiatives and application of intelligent systems into oil and gas infrastructures are also changing the sector.

The technological developments in refining and energy storage have also altered the market trends since the organizations are always seeking better ways to improve their operations without harming the environment. Thus, these factors have been the driving forces behind the growth of the oil and gas industry in Japan.

Japan Oil and Gas Market Restraining Factors:

The Japan oil and gas market is not without challenges in terms of its growth and development. One significant challenge is the high rate of import dependence in the country, particularly in oil and gas, exposing it to the effects of international relations as well as changes in the pricing policy in the world markets. This means that both the government and the industry are under pressure to ensure that there are energy supplies that are consistent and available for extended periods of time which can be difficult in today’s dynamic international energy environment.

Moreover, Japan’s bold vision of attaining net carbon emissions by 2050 creates another limitation since it entails a rapid move away from the conventional fuels especially oil and gas. This means high capital expenditure to be devoted to the development of renewable energy sources and cleaner technologies, which would otherwise hamper the development of the traditional oil and gas industry. Additionally, the existing refining facilities have become obsolete and the oil and gas business faces high compliance costs due to stringent emission and sustainability laws which further restrict expansions of the oil and gas business in its traditional forms.

Japan Oil and Gas Market Opportunities:

There are many possibilities in the oil and gas market of Japan, mainly in the energy diversity and clean technologies sectors. In line with its target to attain carbon neutrality by 2050, the country has more investments on liquefied natural gas (LNG) which is seen as a cleaner transitional energy source. Furthermore, Japan is seeking to grow the hydrogen economy and carbon capture and storage (CCS) systems since these technologies will be necessary for the country’s drive to decarbonize.

Expanding opportunities exist in the refurbishment of the aging oil and gas facilities. The aging refineries and pipelines in Japan can be improved through the application of technological innovativeness, digitization and efficient energy consumption. Lastly, the constantly changing global energy dynamics creates a huge market outlook for Japan as its central geographical location will be an added advantage to the distribution of LNG and hydrogen in the Asia-pacific region and beyond.

Japan Oil and Gas Market Segmentation:

By Type

• Upstream
• Midstream
• Downstream

Thе downstream sеgmеnt among the type sеgmеnt is еxpеctеd to account for thе largеst rеvеnuе sharе in thе Japan oil and gas markеt. The dominance is attributed to the refining, distribution, and marketing of petroleum products. Owing to less availability of oil fields in the country, upstream and midstream categories accounts for a less share. Demand for oil from several industries including automobile, energy, industrial, etc. have boosted installation for refining and transportation of refined products. Also, from Japan's advanced refining capabilities and the high demand for petroleum products in transportation, industry, and residential heating. Chiba Refinery, Yokkaichi Refinery, Muroran Refinery, Mizushima Refinery, Kawasaki Refinery, Keihin Refinery, Showa Yokkaichi Refinery, Sodegaura Refinery, and Mizushima Refinery are the major refineries in Japan with ENEOS operating majority of the refineries.

By Application

• Offshore
• Onshore

Thе offshore application sеgmеnt is estimated to account for thе prominent rеvеnuе sharе in thе Japan oil and gas market. Dominance of offshore is attributed to Japan's geographical features, where significant oil and gas resources are located offshore, particularly in the East China Sea. Offshore production allows access to deeper reserves that are not available on land. Innovations in offshore drilling and extraction methods have enhanced efficiency and safety, enhancing its demand. Iwafune-oki Oil and Gas Field is the prominent operational offshore platform in Japan. The development and operation of this oil and gas field are conducted jointly Japex Offshore Ltd. and Mitsubishi Gas Chemical Company, Inc. Japan further had Shiunji Gas Field, Higashi-Niigata Gas Field, Yoshii Gas Field, and Katakai Gas Field, for natural gas production.

Leading Companies in Japan Oil and Gas Market & Competitive Landscape:

The competitive landscape of the Japan oil and gas market is shaped by major domestic and international players, such as JX Nippon Oil & Energy, INPEX, and ExxonMobil. These companies are focusing on diversifying their energy portfolios by investing in cleaner energy alternatives like liquefied natural gas (LNG) and renewable energy sources, given Japan's emphasis on energy security and sustainability. To strengthen their market positions, leading players are adopting strategies like joint ventures, expanding LNG infrastructure, and enhancing technological advancements in refining processes to optimize efficiency and reduce environmental impact.

These companies include:

• ENEOS Holdings, Inc.
• ExxonMobil
• Idemitsu Kosan Co., Ltd.
• INPEX
• JX Nippon Oil & Gas Exploration Corp.
• Shell plc.

Recent Development:

• January 2024, Four Japanese companies — Nippon Yusen Kabushiki Kaisha (NYK), Japan Engine Corporation, IHI Power Systems, and Nihon Shipyard — have signed a series of contracts to build the world’s first ammonia-fueled medium gas carrier (AFMGC) equipped with Japan-made engines.

Japan Oil and Gas Market Research Scope