Page 12 - GLNG Week 47 2022

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Japan bundles up for winter

energy crisis, says long-

term LNG ‘sold out’

SUPPLY JAPANESE politicians have resorted to giving LNG and gas prices were very low and also the
fashion advice as the country prepares for a win- coronavirus (COVID-19) pandemic, when the
ter that could bring hiccups to energy supply. energy markets saw a severe drop in demand and
Tokyo Governor Yuriko Koike has urged the an uncertain future made investment unviable.
Japanese to wear turtleneck sweaters this winter Although big LNG exporters like Qatar,
in order to stay warm and be less reliant on home which recently signed a 27-year supply contract
and office heating systems. with China, and the US, which expects to see a
“Warming the neck has a thermal effect,” she boost in its export capacity in the next couple
said. “I’m wearing a turtleneck myself and wear- years, are ploughing ahead with plans to greatly
ing a scarf also keeps you warm. This is one of expand LNG production, long-term contracts
the tools to get through the harsh winter energy will not be available until 2026, according to the
climate together,” she told reporters in Tokyo ministry.
recently. In early October, JBIC said it would make
The Japanese government has asked the nearly $900mn available to JERA, a joint venture
entire country to conserve electricity usage from between Tokyo Electric Power Co. (TEPCO) and
December 1 until March 31 in the face of a global Chubu Electric Power, in syndication with finan-
LNG shortage. Conservation measures are in cial institutions from the private sector for LNG
place in order to prepare for a sudden increase spot market purchases. And at the end of the
in power demand that could arise with a sudden month, JBIC said it would make a further $674
drop in temperature or a glitch that could affect mn in loans available to the group. Announcing
supply capacity. Prices for LNG have skyrock- its latest loan to JERA, JBIC said the money is
eted in the wake of Russia’s invasion of Ukraine aimed at supporting JERA’s import of LNG to
and actions taken by Western countries to halt secure a stable supply of electricity by ensuring a
the purchase of Russian energy sources, espe- consistent energy flow to Japan.
cially pipeline gas to Europe, which in turn has Australia was Japan’s largest LNG supplier
put the focus on LNG. in 2021, covering 40% of imports. But Australia
Japan relies on energy imports for almost all is facing its own domestic gas crisis whereby
of its energy. The country’s worry over sufficient its populous eastern coast is seeing greater gas
power supply has led it to bring a number of its demand and price rises, while 80% of Austral-
nuclear power plants (NPPs) back online follow- ian gas is exported. Members of the Australian
ing the 2011 tsunami and Fukushima nuclear parliament have called for exports to be limited
crisis, and it has returned to coal to make up the and for Australian LNG delivered to domestic
slack in energy supply, although Tokyo remains markets.
committed to its net-zero programme. But LNG A deal between the government and export-
is the preferred fuel for electricity generation and ers is said to have been reached so as not to actu-
procuring sufficient stocks has proved challeng- ally restrict some LNG from leaving Australia.
ing in a market where supply is short. Bearing this in mind, Australian Resources Min-
While Japan appears to have secured suffi- ister Madeleine King reassured Japanese Minis-
cient supply to get through the winter of 2022-23, ter of Economy, Trade and Industry Yasutoshi
concerns exist about energy supply consistency Nishimura during a recent visit to Tokyo that
and about future winters as it becomes increas- deliveries of Australian LNG and coal to Japan
ingly clear that LNG is scarce and prices on the would not be disrupted.
global spot market have hit an exorbitant level. But Japan is right to be cautious about supply.
Japan’s Ministry of Economy, Trade and Last month, Malaysia’s state-owned oil and gas
Industry (METI) said last week that long-term company Petronas declared force majeure on gas
contract supplies of LNG are sold out until 2026, supply to its MLNG Dua facility due to a pipe-
setting the scene for fierce competition among line disruption. Japan is expected to lose as many
major East Asian LNG importers like Japan, as 10 cargoes as a result, but it is not expecting
China and South Korea, and probably even the interruption of supply to create any major
Europe for the winter of 2023-24. problems. Japan has, however, asked Petronas
Under-investment in LNG export projects to replace the lost LNG cargoes as soon as it is
was deemed the reason for the shortage of LNG, capable of doing so.™
a consequence of a time several years ago when

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