Japanese LNG buyer JERA forecasts less imbalance this winter because of factors like weather and storage
JERA Co. Inc, Japan’s biggest liquefied natural gas importer and utility company, said it expected the LNG demand-supply imbalance to be less serious this winter season than last because the forecast milder weather, the high storage held in Europe and the delayed resurgence of the economy in China.
JERA, which buys around 35 million tonnes per annum of LNG and is Japan’s biggest fossil-fuel electricity generator being owned jointly by Tokyo Electric Power and Chubu Electric, the two largest power companies, gave the LNG market forecast in a company earnings presentation
The presentation in Tokyo was led by JERA President and Chief Executive Hisahide Okuda.
JERA, which currently oversees the operations and provides fuel for a total of 26 power plants in Japan and imports LNG into 11 of Japan’s network of 37 terminals, said the only issue to be concerned with was that of the unexpected.
Potential issues
“Since overall global supply has not grown, there is the potential for LNG production issues on the supply side - a problem at any LNG plant could cause prices to jump. We believe, therefore, that the environment for LNG procurement remains unpredictable,” Okuda explained.
“Turning to LNG fundamentals, although demand for LNG is growing, particularly in Europe, LNG supply is not expected to catch up to that demand until around 2025, leading to a tight supply-and-demand situation,” the CEO said.
“However, at JERA, in addition to building an LNG portfolio that combines long-term, short-term, and spot contracts, we also secure a stable fuel supply by flexibly optimizing procurement and resale through JERA Global Markets,” Okuda added.
He noted that the company was also following the “Strategic Buffer LNG (SBL)” plan proposed by the Ministry of Economy, Trade, and Industry (METI) whereby at least one LNG carrier-load of surplus LNG per month between December and February can be supplied to any domestic operators as determined by METI.
According to METI and its Policy Subcommittee on Electricity and Gas, Japan will have a winter’s reserve margin exceeding the 3 percent minimum necessary to ensure stable supply.
“JERA, however, is taking nothing for granted. We will be doing our utmost to secure both kilowatts and kilowatt hours in order to ensure stable power supply,” CEO Okuda stated.
Older plants
“JERA is moving steadily forward in replacing older thermal power plants with state-of-the-art facilities. Six units, totaling 4.32 million kilowatts, whose replacement has already been completed, have begun commercial operation,” he added.
The CEO declared that looking to 2024, JERA would continue moving forward with an additional 2.99 million kilowatts in power plant replacement.
“We believe that moving decisively in this way to upgrade power sources is an important part of ensuring safety,” Okuda said.
In addition, given the smooth progress of trial operations at Yokosuka Thermal Power coal-fired power plant’s Unit 2, we will be moving its start of commercial operation forward from February 2024 to December 2023, which will also contribute to this winter’s supply capacity,” the CEO said.
The Yokosuka coal-fired plant is described by JERA as a “high-efficiency coal-fired power station that uses an ultra-supercritical (USC) power generation” system.
“Its generating capacity of 650 megawatts will contribute to a stable electricity supply,” Okuda added.
The JERA CEO said that the company was also moving forward with carbon-capture and storage projects in Asia.
JERA is carrying out joint research with Japanese LNG and energy engineers JGC Holdings Corp. and the Indonesian state electricity company Perusahaan Listrik Negara (PLN) on a project to introduce and commercialise CCS for thermal power.
“With these projects and others, we are collaborating on decarbonisation with a growing number of Asian countries including Bangladesh, Thailand, Malaysia, the Philippines, Vietnam, Indonesia and Singapore,” Okuda said.
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