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.

The US Pipeline Hazardous Materials Safety Administration (PHMSA) said it would still take several months for the Freeport liquefied natural gas export plant to fully ramp up and to bring all processing Trains and other facilities on stream.

JERA Co. Inc. of Japan, the largest corporate LNG buyer in the world, reported a loss in the fiscal third-quarter because of higher fuel procurement costs even as revenues more than doubled during the three months.

US export plant Freeport LNG in Texas plans to undertake a facility overhaul of work and safety methods as it prepared to return to full production ramp-up by March 2023 after the shut-down caused by the June 8 fire in 2022.

The US Federal Energy Regulatory Commission said it was awaiting further information from the Freeport LNG plant in Texas for the process to begin for a partial re-start during November and a full ramp-up in production by March 2023.

The FERC said in a statement that it required further information to allow the facility to come back on stream in November as planned.

Freeport was shut down on June 8 due to a pipeline explosion and the company has said that it expected the plant to return to at least partial service by mid-November and for supplies of 2.1 billion cubic feet per day to be received by pipeline.

The Quintana Island facility must also follow more safety orders issued by the Pipeline Hazardous Materials Safety Administration (PHMSA).

The PHMSA and the FERC have been discussing with Freeport LNG management “ongoing damage assessments, repair work plans and plans for restart” since the June 8 events.

Time for review

“FERC reiterates the need for Freeport to provide the status and schedule of implementing the findings, recommendations, and lessons learned resulting from the root cause investigation and assessments as soon as possible to allow sufficient review time,” the regulator has said.

Freeport LNG said it aimed to restore more than 85 percent of pre-fire processing capacity in November and to ramp-up the facility to 100 percent of capacity by March 2023.

“We continue to progress our work towards achieving the November restart of our liquefaction facility,” said Freeport LNG in a statement.

“That work includes completing the final repair and restoration efforts, completing required work plans and obtaining the necessary regulatory approvals required before the facility's restart,” added Freeport LNG.

The June 8 incident occurred in pipe racks that support the transfer of LNG from the facility's LNG storage tank area to the terminal's dock facilities located on the north side of the dock basin.

None of the liquefaction Trains, LNG storage tanks, dock facilities nor the LNG process areas were impacted and there were no injuries reported.

Expansion plan

Freeport LNG was founded by billionaire Michael Smith who is Chairman and Chief Executive. When the explosion occurred, Smith and his team were 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.

The plant is the joint second-largest liquefaction facility in the US, from seven existing facilities, along with Cameron LNG and Corpus Christi LNG, and is surpassed in output only by the six-Train plant at Sabine Pass in Louisiana, owned by Cheniere Energy.

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.

Japanese liquefied natural gas imports declined last month by 0.4 percent after three successive increases and year-on-year costs more than doubled as volumes increased from Asia and Australia.

Shipments of LNG to Japan’s network of 37 terminals amounted to 6.16 million tonnes in July 2022, or 92 cargoes, compared with 6.19MT, or 91 cargoes, in July 2021, according to the preliminary trade figures from the Japanese Ministry of Finance.

Japan had imported 5.80MT in June 2022 compared with 5.70MT in the same month of 2021.

The nation’s LNG costs in July 2022 amounted to 773.1 billion yen ($5.65Bln), a more that 124 percent increase compared with the 344.99 Bln yen ($2.52Bln) paid in June 2021.

Weaker yen

The effect on Japan’s balance of payments was severe in June as the Japanese yen dropped to a 24-year low against the dollar, though it recovered in late July and August, though dollar-based commodities like energy are still more expensive when converted back into yen.

Japan’s 2021 LNG cargo deliveries had been less than those of China for the first time and came to 74.31MT, down 0.2 percent on 2020 and 4.62MT less that the Chinese total for 2021.

Japanese thermal coal shipments also fell in July to 9.36MT, down by 4.1 percent from July 2021.

The price of thermal coal deliveries jumped higher to 408.46Bln yen ($2.98Bln), up 262.4 percent from July 2021.

During July the volumes of delivered LNG increased from Asia and Australia compared with last year.

Shipments of LNG to Japan in July increased by 19.6 percent to 1.73MT from Asian countries like Malaysia and Indonesia.

Middle East cargo deliveries from nations like Qatar were down by 54.7 percent last month to 401,000 tonnes.

Deliveries from the US increased by 8.9 percent from July 2021 to 665,000 tonnes.

This was higher than the 562,000 imported in July from the Russian LNG plant on Sakhalin Island, which were down 26.1 percent from July 2021.

The balance of LNG imports in July 2022 came from Australia, African nations and the spot market.

That segment of the imports was higher at 2.80MT compared with the 2.48MT logged in July 2021.

Nuclear

As of the start of July 2022, 10 nuclear reactors at six power stations have been given the go-ahead to restart in Japan but only four reactors were in operation.

Several Japanese Prefectures have agreed to restart the reactors, though were awaiting the implementation of safety measures and the completion of other construction work.

Before the Fukushima disaster in 2011, 54 nuclear reactors were in operation in Japan, supplying about 30 percent of the country’s electric power.

The 10 reactors with start-up approvals are at the following six power stations: Ōi, Takahama, and Mihama (Kansai Electric), Genkai and Sendai (Kyushu Electric) and Ikata (Shikoku Electric).

These plants based in western Japan all use pressurized water reactors, which are different from the boiling water reactors at the Fukushima plant than exploded after an earthquake and tsunami.

The US Freeport LNG plant in Texas now estimates that the resumption of partial liquefaction operations following the June 8 fire will be early October 2022 and with a year-end target for the resumption of full production.

Woodside Petroleum, the Australian operator of the North West Shelf and Pluto LNG export plants, said the processing of gas had started ahead of schedule from new fields offshore Western Australia, opening the way for more LNG shipments.

Japanese utility Tohoku Electric Power has signed a contract with BP of the UK for six cargoes of liquefied natural gas for early 2022 to avoid paying too high a price on the spot market and to help keep inventories at a high level this coming winter.