LNG

Japanese liquefied natural gas imports increased last month as thermal coal imports dropped and energy players in Japan signed more LNG supply contracts amid stricter energy security polices to confront geopolitical uncertainties.

Japanese liquefied natural gas imports were still in sharp decline with more competition coming from thermal coal and nuclear and as storage levels increased under government energy security policies ahead of the Northern Hemisphere winter season.

Japanese liquefied natural gas imports plunged by more than 20 percent in June from the same month last year while half-year imports fell 13 percent with more competition coming from thermal coal and nuclear and more gas storage being built earlier in 2023 as prices declined.

Japanese liquefied natural gas deliveries declined by almost 10 percent last month even as close to record deliveries were made by Australia and thermal coal was the preferred fuel over LNG for power generation.

JERA Co. Inc, the largest buyer of liquefied natural gas for Japan, has overhauled its senior management structure and appointed co-Chief Executives and removed the positions of Chairman and President.

Japan has formally retaken from China its position as the World No. 1 LNG importer with more volumes coming from Australia, Russia and its Asian neighbours even as overall deliveries to Japanese terminals fell in 2022 and slumped in December.

Japanese monthly LNG imports dropped by 5.4 percent year-on-year as costs increased by more than 50 percent and with the number of shipments from Asian nations and Australia rising as deliveries from other regions fell.

The November 2022 LNG shipments to Japan’s network of 37 terminals amounted to 5.55MT, or 82 cargoes, compared with 5.86MT, or 87 shipments, in November 2021, according to preliminary trade data from the Finance Ministry.

The deliveries last month were, however, higher than those in the previous month of October 2022 when they were 5.08MT.

Those October shipments had been higher by 9.9 percent than the October 2021 deliveries received.

The costs of the November LNG cargoes increased by 52 percent year-on-year to 750.52 billion yen ($5.48Bln) compared with the November 2021 costs of 494.77Bln yen ($3.61Bln), the Ministry data showed.

For the past six months, Japan has seen a record trade deficit for each month, as rising energy and raw material costs have pressured the economy.

While LNG imports fell in November deliveries of thermal coal for power generation also plummeted by 18.5 percent to 8.58MT.

The top eight suppliers of LNG to Japan have most recently been Australia with more than one-third of deliveries, Malaysia, Qatar, Russia, the US, Brunei and Papua New Guinea.

Cargo sources

The November shipments from Russia’s Sakhalin Island plant in the Far East fell 14.4 percent to 446,000 tonnes while deliveries from the US dropped by 52.2 percent versus November 2021 to 191,000 tonnes.

Shipments of LNG from Asia in November increased by 5 percent to 1.62MT.

The Ministry data also showed that Middle East deliveries were the biggest fallers by 54.2 percent to 484,000 tonnes.

The balance of imports and the biggest portion in November 2021 came from Australia with minor additions from African nations and the spot market.

That segment of the imports was well up at 2.81MT compared with 2.34MT in November 2021, though was less than the October 2022 combined import figure of 3.03MT.

Japan has also lagged in increasing nuclear power into the energy mix in 2022.

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. 

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.

Japan, which was receiving an LNG cargo from Russia on May 9, said it would gradually phase out Russian oil imports as part of a Group of Seven sanctions response to the invasion of Ukraine, though would retain its stakes in certain joint ventures, including the Sakhalin LNG and oil projects in the Russian Far East.

Japanese liquefied natural gas imports plunged almost 12 percent last month as cargoes from Australia maintained momentum and those from other regions dropped  with the biggest faller being US shipments.

Japanese LNG imports in February 2022 amounted to 7.10 million tonnes, or 104 cargoes, compared with 8.07MT, or 118 shipments, in February 2021 2021, according to the preliminary trade figures from Japan's Ministry of Finance.

Deliveries of LNG to Japan in January 2022 had tumbled by 15.8 percent to 6.78MT, just under 100 cargoes, compared with 8.06MT in January 2021.

The cargoes received in February cost 676.22 billion yen ($5.72Bln), which was 65.3 percent more than in February 2021 when the costs were 409.06Bln yen ($3.46Bln).

The recent changes in Japan’s LNG delivery system came after the nation formally ceded the No. 1 LNG import position in 2021 to China.

Shipments to Chinese terminals in 2021 had amounted to 78.93MT which was 18.3 percent more than in 2020.

Japan’s Finance Ministry confirmed annual cargo deliveries to Japan as 74.31MT, down 0.2 percent on 2020 and 4.62MT less that the Chinese total for 2021.

Shipments of LNG to Japan in February 2022 from Asian countries dropped by 5.9 percent year-on-year to 1.83MT.

Middle East cargo deliveries from nations like Qatar were also much lower, down 28.9 percent to 854,000 tonnes.

US cargoes drop

LNG imports from the US plunged by the largest margin of all countries of 56.6 percent year-on-year in February 2022 to 411,000 tonnes and were well down on the 651,000 tonnes delivered in January 2022.

The balance of imports in February 2022 came from Australia, African nations and the spot market and amounted to 3.35MT, which was higher than the 3.24MT received in February 2021 and the 3.12MT logged in the previous month.

The February 2022 trade data showed that Japanese imports of thermal coal fell by less than LNG shipments.

Thermal coal imports in February declined by 3.2 percent to 9.51MT as the Asian Northern Hemisphere enjoyed milder weather after coal shipments also fell just 1.3 percent in January to 10.54MT.

The almost parity levels between thermal coal imports and LNG shipments disappeared in 2021 with thermal coal deliveries jumping to 112.92MT, an increase of 7.7 percent.

Nuclear power generation in Japan is still much reduced with a handful of plants with nine reactors from a total of 16 plants with 50-plus reactors having gained the agreement to resume operations.