Japan still uncertain over long-term LNG demand

Source: Heren


Japanese utilities are struggling to predict future LNG demand, because of uncertainty over nuclear power restarts and the growing use of renewable energy, according to speakers at an industry conference in Tokyo.

Although the expiry of long-term LNG contracts in the early 2020s would allow several utilities to make new commitments, domestic gas consumption forecasts remain difficult.

Although in the near term Japan will likely continue to import around 80mtpa of LNG, that quantity will decline slightly going forward.

Japan is not expected to show new LNG demand, given its structurally long portfolio, local market sources said.

Many utilities have to reconsider their energy procurement strategy, because of changes in Japan’s power-generation mix, said Sunao Nakamura, senior executive officer of the energy transactions and projects department at Japanese procurement company JERA.

Utilities are challenged by the liberalisation of domestic gas and power markets, the government’s push to reduce carbon emissions and delays in nuclear power restarts, Nakamura told delegates at the CWC Japan LNG & Gas conference.

Most utilities, including JERA, are expanding their LNG activity in the global market to cope with contractual supply length, particularly from the US, Nakamura said.

Given that global LNG demand is predicted to grow from 250mtpa in 2015 to 400mtpa in 2025, the potential to profit in other markets outside Japan is deemed greater, he added.

JERA and Tokyo Gas are among the Japanese companies that are investing in developing gas-to-power projects in emerging markets in Asia, LNG bunkering as well as upstream production and downstream infrastructure.

JERA also has an agreement with France’s EDF Trading to utilise the French company’s terminals and capacity in European gas markets.

“The integration of the [joint-venture LNG] business will give JERA another outlet to manage its domestic demand fluctuations,” Nakamura said.

Other than signing agreements with Europe and India, Japan is also discussing with China on energy policies and collaboration, Masato Sasaki, director of the oil and gas division at the Ministry of Economy, Trade and Industry (METI), confirmed.

A few Japanese companies have already concluded spot LNG trades with their Chinese counterparties for winter 2017-18, with several also involved in long-term supply discussions, local sources said. xieli.lee@icis.com