LNG

European and Asian natural gas futures and spot prices declined again as markets were confident that threats to shipping would be stopped in strategic trading routes as some European Union nations even managed to build gas storage levels in the week before entering 2024.

Japan, which formally took back the World No. 1 LNG importer spot from China in 2022, reported a small rise in LNG shipments in January though at a much higher cost than in the prior-year period.

Imports for January amounted to 6.82 million tonnes, or about 100 cargoes, and an increase of 0.5 percent from the 6.78MT received in January 2022, according to Japan's Finance Ministry.

The imports cost 873.8 billion yen ($6.54Bln), which was 57 percent more than the 556.6Bln ($4.16Bln) cost of shipments in January 2022.

While China’s LNG imports dropped by 18.8 percent to 64.15MT, the official Japanese LNG import volumes for 2022 came to 71.99MT compared with 74.31MT in 2021, showing a fall of 3.1 percent but still enough to essily maintain the lead over China.

China had overtaken Japan in 2021 to become the world’s largest LNG importer with 78.93MT of imports, though then slipped back because of the economic slowdown and Covid-19 restrictions affecting energy demand.

Japan’s annual LNG costs jumped by 97.5 percent to 8.55 trillion yen ($64.34Bln) in 2022.

Monthly LNG imports for December 2022 to Japan’s network of 37 terminals had fallen by 13.8 percent to 6.06MT from 7.03MT in the same month of 2021.

Coal imports

Japan continued to use an increased proportion of thermal coal for electricity generation and the January coal imports rose by 1.3 percent from January 2022 to 10.68MT.

LNG cargo deliveries from Asian countries like Malaysia and Indonesia increased in January by 17.8 percent to 1.88MT.

Middle East cargo imports rose by 24.1 percent to 787,000 tonnes during the month.

LNG imports from the US tumbled by 73.9 percent year-on-year to 90,000 tonnes as cargoes from American export plants were pointed at Europe.

Imports from Russia declined on the month by 9.7 percent to 704,000 tonnes and cost 78.6Bln yen ($589M) for what amounted to 11 cargoes.

The cost to Japan of Russian deliveries for all of 2022 was 82.4 percent higher than in the previous year with the bill from the Russians coming to 677.5Bln yen ($5.24Bln).

Japan continues its deliveries of LNG from the Russian Far East plant at Sakhalin Island even after the invasion of Ukraine in February 2022 as energy security outweighed the Western-led imposition of sanctions against Russia on the energy and financial fronts.

The balance of Japan's LNG imports in January amounted to 3.86MT in the form of deliveries from the country’s largest supplier Australia, some spot cargoes and small volumes from Africa.

In its energy mix in 2022, Japan has continued to delay more nuclear power re-starts meaning that volumes of LNG and coal purchases remain high.

Since the Fukushima disaster, only 10 reactors have been given the go-ahead to go back into operation compared with the 54 that were online in 2011 and which supplied around 30 percent of Japan’s energy needs.

A further 21 reactors have been decommissioned since 2011 and will never be re-started.

Freeport LNG has updated the timing of the initial restart of its liquefaction facility on Quintana Island in Texas after repairs and refurbishment following the June 2022 fire.

“The company continues to make notable progress on its path towards the restart of liquefaction operations,” said Freeport.

“As of December 23rd, the reconstruction work necessary to commence initial operations is substantially complete, and the company is submitting responses to the last remaining questions included in the Federal Energy Regulatory Commission’s data request,” added the company.

Freeport explained that given the time needed for the regulatory agencies to review the company’s responses and to seek any necessary clarification, Freeport LNG now does not anticipate commencing the initial restart of its liquefaction facility until the second half of January 2023.

“The company continues to have close, collaborative engagement with the regulatory agencies and that engagement will continue as Freeport LNG works towards the safe restart of its facility,” stated Freeport.

When the explosion occurred, Freeport’s Chairman and Chief Executive Michael Smith and his team had been planning for an expansion from 15 million tonnes per annum of output from three Trains to 20 MTPA with the construction of a fourth Train.

Customers

Freeport LNG's main customers include Japan’s largest importer JERA Co. Inc., the Japanese utilities Kansai Electric and Osaka Gas as well as South Korean company SK E&S and buyers in Europe.

During the first quarter of 2022 before the accident, the Freeport plant exported 55 cargoes mainly to import terminals in Europe and North Asia

Freeport shut on June 8 after a pipe failure caused an explosion due to inadequate operating and testing procedures, human error and fatigue, according to a report by consultants hired by the company to review the incident and suggest action.

Even without Freeport volumes, the amount of gas flowing to US LNG export plants hit 13.0 billion cubic feet per day last week, the most since May 2022, 10 days before the Freeport shutdown.

The Freeport closure meant the nation’s other six large-scale export plants have been operating near full capacity.

The Japanese Government’s key Minister of the Economy, Trade and Industry (METI), Yasutoshi Nishimura, said he had approved a proposal to help improve the nation’s emergency access to liquefied natural gas for power generation.

Minister Nishimura said in a statement that he would allow the government agency, the Japan Oil, Gas and Metals National Corporation (JOGMEC), to fund the purchase of spot LNG if required.

“Japan also plans to revise another law to allow the government to order large users to limit use of city gas in case of an emergency,” added the Nishimura statement.

Japanese LNG buyers who are the biggest utilities have been mindful of avoiding high-cost LNG purchases, though during August 2022 monthly LNG costs rose to over the US$6 billion ( 874.47 billion yen) level for the first time.

Rising energy costs are affecting the balance of payments of countries worldwide, though Japan is particuarly affected as it has no sizeable reserves of domestic energy resources and must buy in most of its oil, gas and coal.

However, the move on LNG supplies signals that there are limits to cutting off energy shipments as the Northern Hemisphere winter approaches.

Deliveries of LNG to Japan’s network of 37 terminals have amounted over the past few months to around 6.25 million tonnes, or amount 93 cargoes, according to trade figures from the Japanese Ministry of Finance.

Cargo competition

Even in the past week deliveries of LNG will slip as it lags North Asian LNG users China and South Korea in cargo numbers.

Shipping data shows that Chinese terminals are set to receive about 23 shipments in the week through October 16 compared with 18 bound for delivery to Korea and 14 shipments going to Japan.

Among JOGMEC’s traditional role is to help Japanese companies make equity investment in overseas energy projects as part of Japan’s focus on securing long-term oil and gas and other fuels and to make investments itself in important projects.

JOGMEC has also revised its statutes to investment in new and cleaner fuel ventures rather than just hydrocarbons and to raise its profile in sectors such as carbon-capture and storage.

Just last week, on October 8, JOGMEC agreed to collaborate with the Saudi Arabian Oil Company on upstream fuel ventures.

Hosono Tetsuhiro, Chairman and Chief Executive of JOGMEC, and Mohammed Al-Qahtani, Senior Vice President of Downstream at Saudi Aramco, signed the accord.

“JOGMEC intends to proactively support the implementation and/or provision of risk money, equity capital and liability guarantees, for a specific project in the Kingdom of Saudi Arabia related to the production and/or storage of hydrogen and ammonia, which are our new support areas under the revised JOGMEC law promulgated on May 20,” the agency explained.

Australia LNG operator Santos with stakes in three Asia-Pacific liquefaction and export plants has issued a statement about speculation on the sale of shares in the company by ENN Group of China that had previously held a strategic stake and board representation.

Chinese liquefied natural gas imports in July 2022 to its network of 22 regasification terminals declined significantly on a year-on-year basis amid an economic slowdown while shipments from Russia have edged higher since the Ukraine invasion.

China Gas Holdings, one of the leading non-state controlled companies in the Chinese city-gas and LNG sectors and state-backed Beijing Gas Group, have signed a strategic cooperation agreement to stabilise LNG flows to North China.

Novatek, the Russian natural gas developer of the Arctic LNG II project, has concluded two initial liquefied natural gas supply accords with global commodities firm Glencore and with China’s Zhejiang Energy Gas Group.

Sonatrach, the Algerian state energy company and operator of two liquefied natural gas export plants, and Sinopec of China, an importer of LNG from nations like Australia, have signed an accord to extend and broaden the Chinese major’s 20-year oil producing role in the North African country.

The UK, the second-largest LNG importer in Europe and with an average of around 45 percent of gas-fired usage for power, has hosted its first emissions auction organised by the Intercontinental Exchange, the leading operator of global energy derivative exchanges and clearing houses.