Japan to fund Asian LNG bunkering growth

Thursday, 02 November 2017

The funding will go to develop new demand centres and will be backed by Japan’s Ministry of Economy, Trade and Industry (METI). As part of the initiative, METI will deliver widespread industry training, for LNG producers and consumers.

"Japan will continue to work towards developing liquid LNG markets in Asia, seek specific actions towards creating LNG demand by new LNG utilization measures such as LNG bunkering, and contribute to building international consensus on the benefits of LNG," Hiroshige Seko, minister for METI, said.

The minister is looking abroad for growth due to contractual over-commitment and slow domestic demand growth but expects downstream market deregulation to improve the outlook.

"I would like to encourage leaders of Asian countries to seriously consider expanded use of natural gas as a choice of smart energy...I would like to request LNG producers to think harder on ways to improve the attractiveness of LNG, including proposals of more rational and flexible trade conditions," Seko commented.

Yokohama LNG bunker station

The Japanese government has been a long-term supporter of LNG as a fuel since it pared back the role of nuclear in the country’s energy mix in response to the Fukushima disaster in 2011.

A recent feasibility study commissioned by the government outlined plans to develop Japan’s first LNG bunker station at the port of Yokohama in Kanagawa Prefecture on the south of Honshu island. The proposed facility would be funded via a public-private investment.

Multi-phase market liberalization

The initiative is part of the second phase of ongoing market liberalization efforts by METI and follows an agreement signed with India last week, aimed at facilitating flexibility in LNG contracts and establishing reliable LNG spot price indices.

"A global LNG market is being developed… LNG swaps trades based on the JKM are now growing five times from the previous year, and as many as 16 cargoes of LNG were traded in July alone. This fact indicates that the JKM has established itself as a confident LNG price benchmark in Asia,” Seko added.

A first phase of LNG liberalization over the last year has resulted in domestic power and gas retail sectors opening up to increased competition and a further phase is now planned to divide up operation of formerly monopolistic power-generation plants and transmission and distribution systems by 2020 and of gas pipeline operations by 2022.