LNG

Jan 2 (LNGJ) - An earthquake with 7.6 magnitude hit Japan on January 1 in the Noto region of Ishikawa prefecture on Honshu island and killed at least 30 people in collapsed buildings. The Japan Meteorological Agency issued a tsunami warning for the Noto Peninsula and the advisory covered the coastline of the Sea of Japan, though was later withdrawn as the danger passed.

   Japan’s Ministry of Economy, Trade and Industry (METI) then said in a statement that power generation had been affected in the region. “The earthquake closed two of Hokuriku Electric's coal-fired power plants, the No. 1 unit of 500 megawatts and the No. 2 unit of 700 MW at the Nanao-Ota thermal power plant. There was also reduced output at the 500 MW gas-fired Toyama-Shinko thermal power plant of 300 MW,” said the METI.

The International Energy Agency said the structure of global natural gas markets has been altered by issues raised by the Ukraine conflict and will require still more  closer dialogue between producer and consumer nations to ensure the availability of short-term and long-term pipeline gas and LNG cargo volumes.

The IEA’s annual “Global Gas Security Review” also noted that tensions in the gas markets had eased “significantly” since the beginning of 2023.

The report coincided with the 12th LNG Producer and Consumer Conference in Tokyo involving the leading importers and exporters.

That Tokyo event was co-organised by the IEA and Japan’s Ministry of Economy, Trade and Industry (METI) and has always provided a forum for discussions between natural gas and LNG producer and consumer countries.

The new IEA analysis noted that deeper coordination among market participants remained essential, given momentous shifts in how gas markets function.

The IEA’s latest assessment of market dynamics showed gas markets had moved towards a gradual rebalancing since the start of the year.

High inventories

The report stated that high inventory levels at storage sites in key Asian and European markets provide grounds for “cautious optimism” ahead of the 2023-24 winter heating season in the Northern Hemisphere.

“If injections continue at the average rate observed since mid-April, EU storage sites will reach 90 percent of their working capacity by early August and could be filled close to 100 percent by mid-September,” said the report.

“However, full storage sites are no guarantee against market volatility during the (coming) winter,” the report warned.

The Paris-based body said that there remained “major uncertainties” ahead of the upcoming heating season.

“A cold winter, together with a full halt in Russia piped gas supplies to Europe early in the heating season, could easily renew market tensions,” said the report.

“Fierce competition for gas supplies could also emerge if Northeast Asia experiences colder-than-usual weather and economic growth is stronger than expected in China,” the IEA added.

The security of global gas supplies remains at the forefront of energy policy making, with growing complexity for both the short and long term.

LNG surge

“LNG has become a baseload source of supply for Europe, with its share in total EU demand rising from an average of 12 percent over the 2010s to close to 35 percent in 2022 - similar to the contribution from Russia’s piped gas before the invasion of Ukraine,” said the report.

“Meanwhile, China’s balancing role in global gas markets is set to increase,” stated the IEA.

The report also explained that the “flexibility of gas supply” needed to be reassessed in light of the phase-out of Russian piped gas exports to the European Union.

As producers and consumers engage in closer dialogue to address these dynamics, the new IEA report recommended that they should explore the development of innovative commercial offerings, new procurement mechanisms and cooperative frameworks favouring a more flexible supply of LNG.

The new IEA report also includes a special focus on integrating low-emissions gases into energy systems.

“A new global gas market is taking shape after last year’s crisis. Given this, responsible producers and consumers must reconsider their approaches to supply security and flexibility, cooperating even more closely,” said Keisuke Sadamori, the IEA’s Director of Energy Markets and Security.

“Meaningful efforts are also needed to reduce the carbon footprint of gas supply chains, including through greater use of low-emissions gases,” added Sadamori.

Japanese demand

The report also focused on some individual nations and on the main regions.

In the case of Japan, the leading LNG importer's gas consumption decreased by 12 percent, or 4 billion cubic metres, in the first three months of 2023.

“Gas-fired power generation in the first three months declined by 16 percent (or 15 terawatt hours) according to data from the METI. This was primarily driven by lower electricity consumption, down by 6 percent year-over-year with improving nuclear availability,” said the IEA.

“Japan’s nuclear power output rose by 47 percent (or 12 TWh) in the first half of 2023. In addition, city-gas sales for commercial and industrial use decreased by 3 percent and 12 percent respectively,” added the report.

“For 2023 Japan’s gas demand is forecast to decrease by about 5 percent compared with the previous year,” the IEA stated.

Japan, the world's No. 1 liquefied natural gas importer, has stopped releasing monthly spot LNG prices contracted for or delivered to Japan that had been in force for seven years under the powerful Ministry of Economy, Trade and Industry (METI) and after being brought in to monitor price surges.

Qatar Petroleum has spoken up for the producer side at the LNG Producer-Consumer Conference in Tokyo while also encouraging importers and nations currently without LNG to take advantage of the fuel that is now a crucial part of the global environmental clean-up.