LNG shipments to Japan keep growing despite high spot prices as the country depends on the super-chilled fuel for power generation: Japan again overtook China with regards to North East Asian gas import volumes through July 24, according to shipping data, with Japanese utilities receiving 21 shipments and China around 15 deliveries.
Elevated spot prices at the Japan-Korea Marker (JKM) are signalling gas supply shortages in the months ahead. Though the JKM price for September retreated slightly and last changed hands at $38.095 per MMBtu, compared with $40.405 per MMBtu on July 15, the strip contract for Oct-Dec 2022 has risen in value to $42.190 per MMBtu for October through to $43.990 for December, compared with last week’s $41.350 per MMBtu and $43.400 per MMBtu.
Market observers noted the January 2023 JKM futures prices told “another story of shortages and tight markets”. It was last seen trading at $44.780 per MMBtu while February was at $42.980 per MMBtu.
Turn to nuclear and renewables
The Japanese Prime Minister Fumio Kishida has pledged to further reduce Russian oil, gas and coal imports by increasing the dispatch of nuclear power plants and adding renewables. Japan suspended all nuclear power units after the 2011 Fukushima crisis, but the PM said an accelerated restart will not only lower fossil fuel imports but also curb emissions.
“We will use nuclear reactors with increased safety measures to contribute to reducing the global dependence on Russian energy carriers. Launching just one already existing nuclear reactor will be equivalent to supplying the world market with a million tons of LNG per year,” Kishida said. To that end, the government plans invest 150 trillion yen ($1.16 trillion) over the next 10 years in non-fossil power sources which is expected to nearly halve the country’s greenhouse gas emissions by 2030.
But PM Kishida stressed there would be no change in Japan’s policy of importing Russian LNG from Sakhalin-1 and -2, in which both Japanese companies and the government hold stakes. The Sakhalin-1 liquefaction terminal has been partially funded by Itochu, Marubeni and Inpex, while Sakhalin-2 counts Mitsui and Mitsubishi among its investors.