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.

JERA Co Inc., the largest Japanese liquefied natural gas buyer and power assets owner, said it was overhauling its business while increasing its medium-term LNG activities with a larger carrier fleet as it aimed for 3.6 trillion yen ($33 billion) of sales in fiscal 2019.

The company said it now had volumes of LNG amounting to 35 million tonnes per annum, upstream investments in five projects and was increasing its LNG fleet from 18 vessels to 25 to ship its cargoes.

However, while LNG activities would focus on growth through 2030, after that date Japan’s needs for power generation could be different.

For its power generation arm of Tokyo Electric Power and Chubu Electric, JERA controls domestic power capacity of 67 gigawatts and a total of nine gigawatts of overseas output.

JERA said the direction was uncertain for Japan’s future power mix, though by 2030 it could have 20-22 percent nuclear power units in operation, 24-22 percent made up of renewable energy projects, 27 percent gas-fired plants supplied with regasified LNG, 26 percent coal-fired plants and 3 percent oil-fired plants.

Under the transition, Japan could replace more plants requiring LNG with renewable projects than other generating facilities, leading to a possible future decrease in LNG imports of around 14 percent after 2030.

The 2030 energy mix numbers differ significantly from the 2016 figures of 16 percent nuclear, 41 percent gas-fired plants using LNG, 33 percent coal and 10 percent oil.

“Population shrinkage and sluggish demand means that a constant growth of domestic demand for electricity can’t be expected in the future,” according to JERA.

Its figures suggest the Japanese population could drop to 93 million people by 2060 from 128 million at present.

JERA explained that its company structure would now comprise three separate departments overseeing the five main sectors of its business, fuel markets, fuel procurement, power plants, electricity sales and the domestic electricity market.

JERA said the role of its “Optimization Department” would assume greater importance in the future.

“It will be responsible for increasing profits through operational excellence in power plants and fuel terminals, as well as market trading of fuel, electricity and gas, based on the existing agreements,” said the company.

The company’s “Business Development Department” would also have a key role.

“It would increase returns by achieving the optimal asset portfolio through new installations and the replacement and restructuring of power plants,” added the company.

JERA’s “Operations & Maintenance Department” would be responsible for boosting returns by achieving high value-added services through “agile operations and cost reductions” in utilizing its infrastructure.

The company said it would use LNG and renewables to spark the transition to a clean-energy economy up to 2025.

“Through enhancing the LNG value chain and undertaking large-scale renewable energy development and constructing a complementary relationship between LNG-fired power and renewables, JERA will provide stable, economic and clean energy,” stated the company.

JERA said it would also implement “six measures” to achieve its strategy goals and to be a world leader in LNG and renewables.

“For LNG, we would maintain and expand our fuel procurement scale through replacement of domestic power plants with more efficient facilities and with expansion of generation,” it explained.

“We would leverage that scale for LNG trading expansion and upstream project participation and improve profitability along the entire value chain,” JERA added.

“For renewable energy, we would leverage our large-scale project development competence that we gained from the existing projects, promote development focusing on offshore wind power in particular, and grow it as one of the main pillars of the business in our future portfolio,” stated the company.

Spot liquefied natural gas cargoes arrived in Japan last month costing an average of $8.30 per million British thermal units, a drop of $2.20 per MMBtu compared with the previous month.

Japanese liquefied natural gas imports in October increased by 6.5 percent as shipments from the Middle East and Australia offset a drop in Asian cargoes as the nation’s monthly LNG costs also jumped more than 49 percent year-on-year on higher prices and volumes.

Japanese spot LNG cargo prices edged up last month on a contracted basis to $10.70 per million British thermal units as winter demand gathered pace in North Asia, where prices are now an average $2.50 per MMBtu higher than a year ago.

Japanese energy company Inpex Corp. has acknowledged another delay in the export of the first cargo from the Australian Ichthys LNG export plant near Darwin, now envisaged for October after delays caused by electrical faults on an offshore platform.

Japanese spot cargoes contracted in April to arrive in Japan at a later date cost an average of $9.10 per MMBtu compared with $5.70 per MMBtu in April 2017, a rise of 59 percent and along with oil-linked, long-term contract deliveries will be adding to the nation’s energy import costs as oil prices rebound.

Japanese liquefied natural gas imports declined amid a more than 20 percent jump in thermal coal shipments to replace LNG for power generation in Japan as LNG costs in June showed a surge of 44 percent compared with a year ago on similar volumes.

Japanese annual liquefied natural gas imports declined for a second year as shipments from the Middle East fell 13 percent and were offset by more cargoes from the Asia-Pacific region and the spot market.