Tougher emissions target could spur Japan refiners' shift to clean energy

FILE PHOTO: Steam is emitted from a oil refinery in Sodegaura, Japan February 8, 2017. REUTERS/Issei Kato

TOKYO (Reuters) - Japanese oil refiners may accelerate efforts to make cleaner fuels such as hydrogen if the government sets a more ambitious goal to achieve zero emissions by 2050, the head of the Petroleum Association of Japan (PAJ) said on Thursday.

“If the government upgrades its 2050 carbon emission goal to zero from an 80% reduction now, refiners may speed up their efforts to make cleaner energy, using more renewable energy and hydrogen,” PAJ President Tsutomu Sugimori told a news conference.

The Japanese government will pledge next week to reduce greenhouse gas emissions to net zero by 2050, Nikkei reported on Wednesday.

Sugimori, who is also chairman of Eneos Holdings Inc 5020.T, Japan's biggest oil refiner, said gasoline demand is gradually recovering from a slump caused by the COVID-19 pandemic earlier this year, although long term it will be on a downtrend due to a falling and ageing population.

Eneos, formerly JXTG, unveiled last year its long-term strategy with an assumption that domestic oil demand would halve by 2040, or fall 2% annually.

Sugimori said demand could now decline more rapidly as a result of the pandemic.

“It depends on how much demand we see after the pandemic, but the expected drop in domestic oil demand may be faster than we had anticipated,” Sugimori said.

“To reflect such a possibility, refiners will need to think about their production capacity and structure,” he said, without elaborating.

He also said that Japanese refiners’ kerosene output and an inventory build by users and dealers are on track in October to meet winter demand, adding that whether or not Japan needs to import kerosene this winter will depend on temperatures.

Reporting by Yuka Obayashi; Editing by Kim Coghill and Susan Fenton