LNG

Osaka Gas, a leading Japanese LNG importer, reported a 43 percent increase in consolidated net sales for the fiscal year to the end of March 2023, mainly due to higher prices for city-gas in Japan, though profits fell year-on-year because of the shut-down of Freeport LNG in Texas for most of the year from June and the higher cost of replacement cargoes.

Osaka Gas, which is part of the Daigas Group, increased annual sales to 2.27 trillion yen ($16.8 billion), up from 1.59 trillion yen ($11.8Bln) in the previous fiscal year.

The utility’s gross annual profits dropped to 282.2 billion yen ($2.09Bln) from 314.2Bln yen ($2.33Bln) in the 2021-2022 fiscal year.

Ordinary profits declined by 33.5 percent on the year to $74.65Bln yen ($560.8M) versus 113.52Bln yen ($841.5M) in the previous fiscal year.

“This was primarily due to the higher unit selling price of city gas under the fuel cost-adjustment system and an increase in sales from a rise in LNG prices and in the Domestic Energy Business and an increase in sales from the upstream project in the USA and Australia in the International Energy Business,” said Osaka Gas.

Negative impact

“In the Domestic Energy Business, although the negative impact of the time lag between fluctuations in raw material costs and their reflection in the unit selling prices diminished compared with the previous fiscal year, costs for LNG procurement increased,” the company explained.

Osaka Gas added that its number of consolidated subsidiaries was currently 154, with nine subsidiaries added and five removed since the fiscal year ended.

In its explanation of reduced profits from Freeport LNG, Osaka Gas noted that a fire broke out at the liquefaction plant of the Freeport LNG project, one of the Daigas Group’s investments and LNG sources.

“In response to the shutdown, we prepared to secure replacement LNG for the volumes the Group originally planned to procure from the project during the shutdown period and arranged modification regarding the contracts related to LNG procurement from the Freeport Project. The Project restarted operations at the plant in February of this year,” said Osaka Gas.

Global volumes

Osaka gas also has booked volumes from other global projects such as Oman LNG in the Arabian Peninsula, Gorgon LNG in Western Australia, the nearby Northwest Shelf Project and the Bintulu LNG plant in Malaysia.

Other Osaka Gas suppliers include Papua New Guinea LNG and the Sakhalin export plant in the Russian Far East.

In its future earnings forecast to March 2024, the utility said that consolidated ordinary profit was expected to increase by 83.3Bln yen ($607M) year-on-year to 159.0Bln yen ($1.78Bln) with Freeport back on stream.

“This is primarily due to an increase in profit in reaction to the absence of costs and losses associated with the Freeport fire in this fiscal year,” said Osaka Gas.

Tokyo Gas, the second-largest Japanese liquefied natural gas importer, has completed construction of a high-pressure pipeline called the Ibaraki Line to complete the mutual back-up system between four LNG import terminals as the Hitachi facility has also expanded storage.

Inpex Corp., the operator of the Ichthys LNG export plant in Australia and developer of the Abadi project in Indonesia, has pledged to help provide security of domestic natural gas and oil supply in Japan after the country’s declaration of a state of emergency over the coronavirus.

Ohgishima City Gas Supply Co., a joint venture between Japan’s main LNG importers, has begun commercial operations of a city-gas production and supply facility with a calorific value adjustment system in the Ohgishima district of Kawasaki City.

Japanese liquefied natural gas imports have gone into reverse as shipments dropped for a fifth straight month amid competition from thermal coal and nuclear and with Australian and spot cargoes replacing deliveries from the Middle East and Asia.

Cargoes delivered to Japan in March 2019 amounted to 7.29 million tonnes compared with 7.93MT in February 2018, a fall of 8.1 percent versus March 2018.

Japan’s February deliveries had plunged by 11.4 percent and the last time Japanese imports rose was in October 2018 when 6.53MT was received, a 6.5 rise on the previous October. Even during the peak winter months from November 2018 through January 2019, imports dropped

Nine of Japan's nuclear power plants, which numbered 54 on line before the Fukushima disaster in 2011, have re-started to reduce LNG needs.

Thermal coal imports were preferred over LNG in March as 9.58MT was imported, an increase on February, though down 3 percent on March 2018.

The cost of the March 2019 cargoes came to 445.29 billion yen ($3.97Bln), a rise of 7.5 percent from the 414.35Bln yen ($3.70Bln) the cargoes cost in the same month a year ago.

For balance of payments purposes, Japan has been trying for a number of years to bring LNG import costs under control.

The Ministry of Finance data for March showed that Asian LNG shipments from nations such as Malaysia and Indonesia, Papua New Guinea and Brunei dropped 20.7 percent year-on-year to 1.73MT.

Imports from the Middle East region fell 26.7 percent versus 2018, with shipments from countries like Qatar, the United Arab Emirates and Oman totalling 1.32MT in March.

US shipments amounted to 198,000 tonnes, down on the 335,000 tonnes received in February. 

Monthly Russian shipments from the Sakhalin Island plant in the Far East dropped 19.8 percent in March to 524,000 tonnes.

The balance of imports from Australia, African nations and the spot market amounted to 3.51MT, a jump of 24 percent compared with the 2.83MT received in February 2019. The volume of cargoes was also up 11.6 percent year-on-year versus the 3.14MT logged in March 2018.

Japanese LNG imports had declined by 0.9 percent in 2018. The 2018 imports amounted to 82.85MT versus 83.63MT received in 2017.

Japan’s 2018 import bill was 20.8 percent higher than in 2017 at 4,730Bln yen ($43.14Bln). The Japanese had paid 19.3 percent more in 2017 with an LNG bill of 3,915Bln yen ($35.58Bln).

Japanese spot liquefied natural gas cargoes arrived in Japan last month at a cost of $1.70 per million British thermal units less than the previous month and down $3.10 per MMBtu versus March 2018.

The delivered cargoes in March 2019 had cost an average of $7.10 per MMBtu versus $8.30 per MMBtu in February 2019 and $10.20 per MMBtu in March 2018.

Shipments contracted in March 2019 had an average price of $6.40 per MMBtu compared with $7.50 per MMBtu in February 2019 and $8.80 per MMBtu in March 2018, a year-on-year drop of $2.40 per MMBtu.

The North Sea Brent crude oil price that influences Japanese long-term contract prices also impacts spot LNG and other energy markets and the price was at around $65 per barrel or more in the first quarter of 2019.

The spot cargo numbers come from the commerce division of the Japanese Ministry of Economy, Trade and Industry and are only issued if a minimum number of two trades are recorded.

The Ministry emphasizes that “spot LNG” refers to fuel traded on a cargo-to-cargo basis and does not mean shipments under contracts on a short-term, medium-term or long-term basis.

The statistical accounting of the spot prices started in March 2014.

Overall Japanese LNG imports dropped 11.4 percent in February 2019 with only Middle East volumes holding up as more coal-fired power use and nuclear generation offset the need for gas-fired power as the cost of LNG shipments also increased.

Cargoes delivered to Japan in February 2019 amounted to 7.35 million tonnes compared with 8.29MT in February 2018.

The cost of the February 2019 cargoes came to 465.54 billion yen ($4.18Bln), a rise of 8.6 percent from the 428.72Bln yen ($3.85Bln) the cargoes cost in the same month a year ago.

Japanese liquefied natural gas imports plunged 11.4 percent with only Middle East volumes holding up as more coal-fired power use and nuclear generation offset the need for gas-fired power as the cost of LNG shipments also increased.

Japanese liquefied natural gas imports dropped by 8.7 percent in January as more coal and nuclear power generation offset the need for LNG cargoes, though the cost of the LNG rose by more than 15 percent compared with a year ago.

Shipments to Japan in January amounted to 7.54 million tonnes compared with 8.26MT in January 2018.

The December 2018 imports had amounted to 7.25MT compared with 7.95MT in December 2017.

Nine of Japan's nuclear power plants, which numbered 54 on line before the Fukushima disaster in 2011, have re-started to reduce LNG needs.

A rise in January thermal coal imports also helped offset the drop in LNG cargoes. Coal shipments rose 7 percent in January compared with the year-ago period to 10.67MT.

The cost of the January 2019 cargoes came in at 479.22 billion yen ($4.32Bln), a rise of 15.3 percent from the 416.29Bln yen ($3.75Bln) the cargoes cost in the same month a year ago.

The Ministry of Finance data for January showed that Asian LNG shipments from nations such as Malaysia and Indonesia, Papua New Guinea and Brunei dropped 25.8 percent to 1.91MT.

Imports from the Middle East region fell 23.7 percent year-on-year, with shipments from countries like Qatar, the United Arab Emirates and Oman totalling 1.48MT in January 2019.

US shipments of LNG amounted to 267,000 tonnes, a rise of 36 percent on the same month last year.

Japan imported 2.49MT of US cargoes in 2018 and that figure will rise in 2019 as the nation will be importing more cargoes.

These will come from the Cheniere Energy-owned Sabine Pass plant in Louisiana and the Cove Point plant in Maryland operated by Dominion Energy, as well as the newest Cameron LNG plant in Louisiana set to start operations under Sempra Energy and with Japanese shareholders.

Monthly Russian shipments from the Sakhalin Island plant in the Far East declined 7.6 percent in January to 617,000 tonnes.

The balance of imports from other countries amounted to 3.26MT, with most volumes coming from Australia, backed by shipments from African nations and the spot market.

Japanese LNG imports had declined by 0.9 percent in 2018. The 2018 imports amounted to 82.85MT versus 83.63MT received in 2017.

Japan’s 2018 import bill was 20.8 percent higher than in 2017 at 4,730Bln yen ($43.14Bln), according to the Finance Ministry. Japan had paid 19.3 percent more in 2017 with an LNG bill of 3,915Bln yen ($35.58Bln).

Japanese spot LNG delivered cargo prices surged to an average of $11.50 per million British thermal units in November, a rise of $4.40 per MMBtu compared with the price a year ago of $7.10 per MMBtu.

The average price of spot LNG contracted in August 2018 for shipment to Japan was given by the government as $10.70 per million British thermal units, an increase of 7 percent on the previous month and more than 84 percent higher than the contracted price in August 2017.