Despite fuel restrictions at four of Jera Co. Inc.’s gas-fired power plants in Tokyo last month, Japan’s LNG imports are again expected to decline this year.
Liquefied natural gas stockpiles hit their lowest point since January 2021 last month, when they fell below the five-year average of 2.14 million tons (Mt). Cargo deliveries were delayed due to poor weather conditions in Tokyo Bay. The situation, however, was not considered critical since Japan has exited the peak winter season.
Japan’s LNG balance can change rapidly in a span of several weeks, Rystad Energy analyst Masa Odaka noted. “On a very cold day, the Tokyo region can consume approximately one LNG shipment worth of LNG,” or around 65,000 metric tons, for city gas, he said.
Additionally, major power utilities, such as Jera, have been burning more fuel because spark spreads have been positive, leading to profits. “Jera and other power utilities had an incentive to consume LNG and generate electricity, and even purchase additional LNG on the spot market when needed, as it was economical and in their best interest to do so,” Odaka told NGI.
There is additional solar power generation planned for April and May, which could indicate reliance on natural gas-fired power generation is likely to come down significantly in the coming weeks. Temperatures are higher as well, which is another reason why LNG held by major power utilities has since increased.
Japan, the world’s second-largest LNG importer after China, imports 80-90% of the super-chilled fuel via long-term contracts. Most LNG deliveries are purchased ahead of peak winter and summer months to meet demand.
Due to the ongoing restart of the country’s nuclear power plants, along with an increase in solar and coal-fired power generation, Japan’s LNG imports are forecast to fall below 60 Mt this year, according to the Institute of Energy Economics, Japan (IEEJ). Last year, LNG imports fell by 9% to 68 Mt.
Kpler data shows that Japan’s LNG imports were 550,000 tons lower during the first three months of this year, compared to the same period last year. Imports of the super-chilled fuel dropped for the third consecutive month in March.
While LNG demand for power generation is expected to decrease in the future as the use of nuclear power and renewables rise, the increase in nuclear power would impact a few companies this year.
Chugoku Electric Power Co. Inc.’s restart of Shimane Unit 2 expected in August and Tohoku Electric Power Co. Inc.’s restart of Onagawa Unit 2 scheduled in September would likely provide baseload electricity and dampen LNG demand.
“If one of these power plants delays restart by a month, then this could translate to approximately 130,000 tons of LNG consumption as alternative fuel is needed to make up for the lack of nuclear power generation,” Odaka said.
Kyushu Electric Power Co. Inc. and Kansai Electric Power Co. Inc. have restarted all of their nuclear power plants, limiting LNG demand unless there is an unexpected outage.
Construction on Hokkaido Electric Power Co. Inc.’s Tomari nuclear power plant is expected to be completed in 2027. The company has one LNG power plant, unlike other larger Japanese power utilities.
