Japan puts in measures to ensure smooth LNG supplies
The Japanese government has planned a number of measures to ensure the supply of LNG is not severely disrupted in the coming months due to the ongoing conflict between Russia and Ukraine. The Ukraine conflict has created supply uncertainties in the global gas markets and pushed LNG prices to near-record levels.
One of the measures that Tokyo is mulling is to allow the Japanese industry ministry to help redirect LNG supplies in the event of an emergency so that gas and power companies do not run out of the commodity. According to a Reuters report published on October 17, Japan plans to introduce a new framework to facilitate this move.
Under the proposal, the ministry would act as an intermediary to supply LNG from operators with sufficient stocks to those running short. The action would be taken based on requests from electricity and gas companies that are short of LNG.
"Both power and gas utilities have secured a solid level of LNG inventories for this winter," an official at the ministry told Reuters. "But it would be better to reinforce the existing framework to make it easier to accommodate the fuels across the power and gas industries in case of emergencies that make it difficult to procure fuel nationwide."
Japan is one of the world's biggest importers of LNG and in 2021 shipped in 74.31mn metric tons of the commodity.
JOGMEC to buy LNG in case of emergency
Japan is also looking to allow state-owned Japan Oil, Gas and Metals National Corporation (JOGMEC) to directly import LNG on behalf of utilities in case of emergency. JOGMEC is already allowed to import liquid fuels on behalf of the utilities. The government has approved a plan to revise a regulation to allow this earlier this month.
The government is also planning to introduce measures to restrict the use of city gas. Japan may make necessary legal amendments to force city gas users to restrict the use of energy during severe supply crunches, Japan Times reported last month. Such a system already exists for the electricity sector, but not for the gas sector.
JIBC provides loan to Jera for LNG purchases
The Japan Bank for International Cooperation (JBIC) early this month agreed to provide a 130bn yen ($900mn) loan to Jera for LNG purchases. The loan will be co-financed with private financial institutions.
“This loan will provide the necessary funds for Jera to import LNG,” JBIC said. “Resource prices continue to rise, and a stable supply of electricity is recognised as an urgent issue for the lives of Japanese citizens and economic activities. It's becoming more and more important.”
JBIC said it will continue to actively support efforts by Japanese companies to secure a stable supply of important resources.
Outages at major LNG plants
In addition to the Ukraine conflict, supply outages at some major LNG export plants have also created uncertainties. Freeport LNG in the US is facing a continued shutdown after an explosion in June this year and the plant is now expecting an initial restart in early to mid-November. The restart was earlier anticipated by the end of October.
Operations at MLNG Dua’s production facility in Malaysia have also been disrupted due to a pipeline leak. Malaysian state-owned Petronas on October 10 declared force majeure on gas supply to MLNG Dua due to a pipeline leak caused by soil movement at the vicinity of KP201, Sabah-Sarawak gas pipeline that occurred on September 21.
This has impacted the supply of gas to MLNG Dua’s production facility at Petronas LNG complex in Bintulu, Sarawak. The company said that force majeure affects the supply of gas to MLNG Dua’s production facility only, while the other LNG production facilities within the complex continue to operate as planned.
The state-owned company said it is currently conducting a comprehensive evaluation to ensure the integrity and safety of the pipeline.