Page 4 - GLNG Week 18

GLNG COMMENTARY GLNG
Warning issued over potential LNG shortage in Japan
The world is struggling to absorb a glut of LNG, but import-dependent Japan could find itself facing a shortage of the fuel
PERFORMANCE
WHAT:
Warnings are emerging that Japan could find itself facing a shortage of LNG.
WHY:
The fuel is difficult to stockpile and Japan only has around two weeks’ worth of it.
WHAT NEXT:
LNG importers are starting to introduce measures anticipating potential supply disruptions.
GLOBAL markets are increasingly struggling to absorb a glut of LNG that has been exacer- bated by the demand impact of the coronavirus (COVID-19) pandemic. But as some buyers are seeking to cancel contracted cargoes on con- cerns that they will end up with excess LNG, Japan could be facing the opposite problem. Warnings have recently emerged that the island country, which relies on LNG for about 40% of its electricity generation needs, could find itself facing shortages of the super-chilled fuel as a result of COVID-19.
On one hand, measures taken to contain the virus can lead to demand for LNG dropping as industrial activity slows and power generation needs drop. On the other, if LNG is still required for meeting what reduced power generation demand there is, disruptions to imports could pose a significant additional challenge to a coun- try already grappling with an outbreak.
Complications
Complicating matters is the fact that LNG is ill-suited to long-term storage. Thus Japan only has a two-week stockpile of the fuel, despite having the largest LNG storage tank capacity in the world. The use of floating
storage, meanwhile, has been on the rise glob- ally recently as the industry has adjusted to deteriorating market conditions, but even in specialised LNG carriers, the fuel is prone to evaporating, limiting the amount of time that floating storage stays viable.
Regasifying the LNG in order to store it is also not an option for Japan given its lack of necessary infrastructure.
The country, which has extended its state of emergency until the end of the month as it seeks to avoid a new wave of COVID-19 infections, will thus be hoping to avoid any disruptions to its LNG supply. The fuel arrives in the country primarily from the Middle East and Southeast Asia. Given the amount of time shipments take to reach Japan – roughly a month from the Mid- dle East, for example – and with tankers arriving constantly, disruptions resulting in a handful of missed deliveries may not be immediately appar- ent. But an extended cut-off could cause serious problems.
Compounding worries is the fact that Japan was already facing a power shortage this year before COVID-19 became the biggest challenge facing the world. The country has slowly brought some of its nuclear capacity back online recently,
Japan relies on LNG for about 40% of its electricity generation needs.
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w w w . N E W S B A S E . c o m Week 18 08•May•2020