Largest Japanese LNG importer JERA set for tight power market

Tuesday, 06 July 2021
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Outlooks point to the 2021 summer season requiring careful strategies 

LNG News Editor: 

JERA Co. Inc., the Japanese LNG buyer of 35 million tonnes per annum of volumes and with control of a fleet of 20 LNG carriers, has drawn up measures to address supply and demand issues in Japan through the Northern Hemisphere summer season.

JERA stated that this summer season was expected to be the tightest in several years, according to the outlook presented to the Japanese government’s Ministry of Economy, Trade, and Industry’s Electricity and Gas Basic Policy Subcommittee.

Balancing act

For this reason, the company has established its own JERA Electricity Supply-Demand Measures Subcommittee.

JERA is Japan’s biggest fossil-fuel generator being owned jointly by Tokyo Electric Power Co. and Chubu Electric, the two largest power companies.

The joint venture company currently operates and provides fuel for a total of 26 power plants in Japan and imports LNG into 11 of Japan’s network of 37 terminals.

JERA’s power plants have 70 gigawatts of capacity and the company is in the process of upgrading existing LNG and steam plants and also proposes to close its 2.2GW of coal-fired plants by 2030.

“The environment for thermal power generation is extremely difficult given uncertainty in the electricity supply and demand outlook caused by increased renewable energy, a tightening supply and demand balance in the fuel market and an increased risk of failure at ageing power generation facilities,” explained JERA.

“In cooperation with related parties, however, the JERA group will make every effort to ensure a stable supply of energy,” it stated.

To prepare for the tight power supply-and-demand market in Japan JERA said it had implemented some counter-measures.

The first of these was the checking of priority equipment at thermal power plants during targeted patrols and regular inspections and this has now been implemented.

JERA has also run trials of its own demand estimates, and the identification of related issues, with the aim of accurately grasping power supply and demand in the areas of Tokyo and Chubu.

The company has subsequently adjusted fuel procurement and delivery schedules to ensure appropriate inventory levels.

JERA said it had made preparations to ensure supply capability at times when supply and demand balance is tight in the Tokyo and Chubu area, including, cooperation with transmission system operators.

The METI, Japan’s most powerful government department, stated in February 2021 that more measures were expected from power companies and LNG importers after the winter season price spikes in Japan when LNG storage levels dropped.

Power supply and demand has now become a key government issue along with LNG supply stability for gas-fired plants.

Japanese spot LNG prices soared for contracted and delivered cargoes in January 2021 to as high as $18.50 per million British thermal units, back to the levels they were in 2014.

LNG competes mainly with thermal coal for power generation in Japan, while the nation’s nuclear power generation is still at a very low level.

Stocks held by Japanese utilities hit a seasonal high of about 1.9 million tonnes around mid-December 2020 before dropping rapidly. The METI has made a priority out of avoiding a repeat of the LNG supply crisis.

Japan’s imports rebounded in May 2021 with steady volumes from the Middle East and Australia and higher cargo numbers from Russia and the US, though LNG deliveries were outpaced by thermal coal shipments.

The May 2021 LNG shipments amounted to 4.95 million tonnes, or around 73 cargoes, which was 8.2 percent higher than the 4.58MT received in May 2020, according to the trade figures.

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