SPECIAL INTERVIEW

SPECIAL INTERVIEW

Decarbonatization Pathway of the Ministry of Economy, Trade and Industry and JAPEX

Carbon Recycling Project in Tomakomai, Hokkaido, Realizing a Net Zero Society

Decarbonization initiatives have accelerated ever since Japan’s declaration to achieve net-zero greenhouse gas emissions by 2050. Simply reducing CO2 emissions by expanding renewable energy and hydrogen is not enough to achieve carbon neutrality. The key lies in "carbon recycling," the process of capturing and reusing CO2. In Tomakomai, Hokkaido, investigations into the carbon recycling business have begun. Japan Petroleum Exploration (JAPEX), Deloitte Tohmatsu Consulting, and the Ministry of Economy, Trade and Industry (METI), three of the organizations involved in the project, explain its potential.

Reusing CO2 as a resource The competitive edge of Japan’s carbon neutrality policy

Carbon recycling, as the name implies, refers to technologies that reuse CO2 as a resource and reduce the amount of CO2 emitted into the atmosphere. CO2 is isolated, broken down, captured, and then reused as a raw material component in the production of chemicals such as polycarbonates, the production of fuels such as jet fuel, and the creation of products such as concrete. Regarding CO2 as a resource has redefined the old idea of simply reducing carbon emissions in order to slow down climate change.

Reusing CO2 as a resource The carbon neutral policies that give Japan an edge

Ministry of Economy, Trade and Industry Agency of Natural Resources and Energy Commissioner’s Secretariat Director of Carbon Recycling Hiroshi TSUCHIYA

Mr. Tsuchiya joined the Ministry of Economy, Trade and Industry (formerly the Ministry of International Trade and Industry) in 1998. In 2016, as the head of NEDO’s Washington office, Mr. Tsuchiya was involved in the analysis of trends in policies related to cutting-edge technology for CCUS and carbon recycling in the US, as well as strengthening relations between the US and Japan. As of July 2021, Mr. Tsuchiya oversees the development and demonstration of technologies related to carbon recycling, builds market awareness, and works to strengthen international cooperation. Mr. Tsuchiya received both his bachelor’s and master’s degrees in engineering from the University of Tokyo.

"Overseas, carbon neutrality policies are focused primarily on reducing CO2 emissions," states Hiroshi Tsuchiya, Commissioner’s Secretariat of the Agency of Natural Resources and Energy at the Ministry of Economy, Trade and Industry and Director of Carbon Recycling. He believes that "setting its sights on carbon recycling is one of the distinguishing characteristics of Japan’s measures against CO2."

The Japanese government has declared that it will achieve net-zero greenhouse gas emissions (carbon neutrality) by 2050, and to achieve this goal, METI formulated the Green Growth Strategy in December 2020. The strategy focuses not only on a wider adoption of renewable energy and hydrogen, but also states that carbon recycling will be the key to achieving carbon neutrality.

Through the Green Growth Strategy, METI revised the Roadmap for Carbon Recycling Technology in July 2021 and brought forward plans to make carbon recycling a reality in society. After researching, developing, and demonstrating new technologies (phase 1), METI aims to make high-value products widely available by around 2030 (phase 2) and high-demand everyday commodities by around 2040 (phase 3).

Mr. Tsuchiya remarks: "The key to making carbon recycling a reality in society is to expand the applications of CO2 while keeping costs low. Technology developed by startups and establishment of ecosystems for open innovation are becoming increasingly common overseas, and the competition is intensifying worldwide. Japan may soon be pushed to accelerate implementation through open innovation as well."

To ensure progress, METI provides research and development support through the New Energy and Industrial Technology Development Organization (NEDO) as well as support for developing innovative technology through the Green Innovation Fund. In October 2021, METI held the Third International Conference on Carbon Recycling. Bringing together the best brains from both the private and public sectors, the conference encouraged active discussions along with the sharing of knowledge regarding initiatives toward making carbon recycling a reality in society.

Mr. Tsuchiya adds: "We are working to establish Osakikamijima in Hiroshima and Tomakomai in Hokkaido as research and demonstration centers to investigate the possibility of establishing an ecosystem. Research on biofuels, chemicals, and carbonates takes place in Osakikamijima while in Tomakomai, in addition to research and development on carbon recycling, the focus is on the feasibility of carbon recycling through sector coupling."

JAPEX’s Yufutsu oil-gas fields

JAPEX’s Yufutsu oil and gas field

JAPEX’s Yufutsu oil and gas field operated in Tomakomai City. Research into the possibility of collecting and storing unused CO2 and the feasibility of increased oil production through EOR (enhanced oil recovery) continues.

Establishment of CO2 value chain gets feasibility studies on carbon recycling businesses underway in Tomakomai

Japan Petroleum Exploration (JAPEX), an enterprise that explores, develops and produces oil and natural gas domestically and internationally and Deloitte Tohmatsu Consulting are together researching the feasibility of carbon recycling through sector coupling in Tomakomai.

In February 2021, both companies won a bid from NEDO to engage in a feasibility study on carbon recycling projects with sector-coupling in Tomakomai.

The goal of the project at Tomakomai is to develop carbon recycling businesses that achieve city-wide net-zero emissions through sector coupling.

In more concrete terms, the objective is to connect businesses (including but not limited to oil fields, refineries, thermal power plants, airports, manufacturers, and the biomass industry) that produce heat and CO2 with businesses that can utilize these resources to promote cooperation and create a value chain through a cycle of CO2 emission, capture, and reuse.

"For example, if CO2 generated in a biomass power plant can be captured and redirected to an oil refinery, it can be utilized to create jet fuel, which can then be sent to airports," Tetsuya Enomoto, senior manager at DTC, states. "As Tomakomai has a suitable environment to establish a CO2 value chain," he continues, "it is the ideal location to create an ecosystem that, in the future, can scale to any size necessary."

Japan Petroleum Exploration Co., Ltd. (JAPEX) Managing executive officer Masanori Amano

Japan Petroleum Exploration Co., Ltd. (JAPEX) Managing executive officer Masanori AMANO

After working at TEPCO Energy Partner, Inc., Mr. Amano joined JAPEX in 2014. Working as the project manager for Fukushima Prefecture’s first gas-fired power plant (1.18 million kW), part of a revitalization project, Mr. Amano led the project until full operations began in 2020. In addition to his work in the power business division, he received a position as head director of the carbon neutral business in January of 2021. Mr. Amano received both his bachelor’s and master’s degrees in engineering from the University of Tokyo."

Masanori Amano, managing executive officer at JAPEX, says, "at Tomakomai, JCCS Co., Ltd. has performed large scale CO2 capture and storage experiments for the past 10 years at their CCS Demonstration Center, which JAPEX contributes to." He adds that "the cooperation and understanding of the local government, companies, and citizens is another reason the location is ideal."

"JAPEX produces oil and natural gas at the Yufutsu Oil and Gas field in Tomakomai and is one of the potential candidates to be included in the value chain. In addition, JAPEX’s knowledge and experience in transportation pipelines may be utilized in the construction and operation of the cross-industry CO2 pipeline network."

Establishing a policy framework for the value chain to operate

Mr. Amano explains the significance of JAPEX, an oil and natural gas development business, engaging in carbon recycling as follows: "In May 2021, in response to the recent trend of de-carbonization, we set our sights on net-zero CO2 emissions by 2050, and formulated the ‘JAPEX2050’, which has as its focus on the establishment of a carbon neutral society and continuous contribution to ensuring a stable supply of energy. For over 50 years, JAPEX has engaged in oil and natural gas development internationally. In response to the ongoing changes, the technology and experience of the past will be utilized and improved to create a carbon neutral society."

In addition to the construction and operation of CO2 pipeline networks in the Tomakomai project, JAPEX is utilizing its subsurface investigation and development technology to investigate the possibility of collecting and storing unused CO2 underground and the potential to increase production of oil through EOR (enhanced oil recovery).

Figure 1 source: Deloitte Tohmatsu Group An oil and gas field, oil refinery, thermal power plant, airport, and manufacturers are centered in and around Tomakomai and form a CO2 value chain for collecting and recycling CO2.

This project is unprecedented in that it involves multiple organizations in the development of a carbon recycling value chain, and there are many questions yet to be answered. One of the big questions facing the project is how to address the various interests of different stakeholders involved.

Mr. Amano states that “working on a project with two companies is simple compared to a project of this scale with dozens of organizations involved because the latter requires a delicate balancing act, and DTC is navigating these difficult waters for us."

Deloitte Tohmatsu Consulting LLC Energy unit Overseas / Government Agencies team leader Tetsuya Enomoto

Deloitte Tohmatsu Consulting LLC Energy unit Overseas / Government Agencies team leader Tetsuya ENOMOTO

Mr. Enomoto is project manager of the carbon recycling project through sector coupling in Tomakomai. Specializing in the energy industry, Mr. Enomoto has implemented over 150 projects in the past 10 years. His strengths lie in proposing policies on low-carbon technologies, as well as formulating research and development strategies for private businesses and designing business strategies for energy companies overseas. Mr. Enomoto received both his bachelor’s and master’s degrees in science and technology from Keio University.

Mr. Enomoto of DTC, who is tasked with cross-industry coordination, adds: "Overseas, startups can easily cooperate with a small number of stakeholders and get projects done quickly, but our project, with dozens of organizations involved, cannot be undertaken in the same way. To build a consensus, it is important for us to first establish a vision for the business and then test its hypotheses through discussions and constructive feedback. It is also important to communicate the significance of the project to top management and receive commitment from them as well."

Now, less than one year into the project, over thirty-seven companies have participated in the discussions, and the progress is evident.

For METI’s Mr. Tsuchiya, "while technological development is important, devising a plan to reduce costs and creating an ecosystem for the value chain to operate is a necessary step to promote carbon recycling." In this regard, "expectations are high for concrete examples such as the one at Tomakomai."

Mr. Amano stresses the idea that "a process to authenticate the origin of the CO2 utilized in manufacturing a product must be established for a value chain of carbon recycling to function," and this is why "creating such a process in Tomakomai would be a worthwhile challenge."

Regarding this topic, Mr. Enomoto says: "In addition to providing consultation on carbon recycling, the Deloitte Tohmatsu Group can provide assurance services to establish a framework for authentication processes, develop the IT platform necessary to operate a value chain, and accommodate any needs a business may have. Within the Tomakomai project, firms from the Deloitte Tohmatsu Group provide a wide variety of services from conceptualization to developing authentication processes. Japan’s carbon recycling initiatives will continue to be supported by these services."

METI’s Mr. Tsuchiya (Center) tells Mr. Amano (left) and Mr. Enomoto (right) about his excitement for the Tomakomai project

CONTACT US

To contact Deloitte regarding carbon neutrality and CCUS, please click here.

CONTACT US