• 4 minutes China 2019 - Orwell was 35 years out
  • 7 minutes Wonders of US Shale: US Shale Benefits: The U.S. leads global petroleum and natural gas production with record growth in 2018
  • 11 minutes Trump will capitulate on the trade war
  • 14 minutes Glory to Hong Kong
  • 56 mins China's Blueprint For Global Power
  • 5 hours Bloomberg: shale slowing. Third wave of shale coming.
  • 3 hours ABC of Brexit, economy wise, where to find sites, links to articles ?
  • 11 hours Boring! See Ya Clowns, And Have Fun In Germany
  • 1 hour Brexit agreement
  • 34 mins Yesterday Angela Merkel stopped Trump technology war on China – the moral of the story is do not eavesdrop on ladies with high ethical standards
  • 16 hours Crazy Stories From Round The World
  • 14 hours the future
  • 11 hours 5 Tweets That Change The World?
  • 1 hour Spain Is On The Edge...Clashes Between Catalonia And "Madrid"
  • 15 hours Climate Protesters Blocking Roads etc...
  • 11 hours Leftists crying to make oil patch illegal friendly: 'Broken system' starves U.S. oil boom of immigrant workers: CONGRESS DO YOUR JOBS INSTEAD OF PANDERING!
  • 10 hours USA Carried Out Secret Cyber Strike On Iran In Wake Of Saudi Oil Attack
Alt Text

Extreme Volatility In U.S. Natural Gas Market Is Here To Stay

Despite some bearish forecasts, natural…

Alt Text

Asian LNG Prices Hit Three-Year Lows

Spot prices for LNG in…

Alt Text

Why Are Natural Gas Prices Crashing?

Natural gas inventories remain remarkably…

Tim Daiss

Tim Daiss

I'm an oil markets analyst, journalist and author that has been working out of the Asia-Pacific region for 12 years. I’ve covered oil, energy markets…

More Info

Premium Content

Is The Japan LNG Buying Spree Over?

What a difference just a few years can make. In the aftermath of the 2011 Fukushima nuclear disaster that eventually saw Japan’s 50 nuclear reactors shut down due to safety concerns, the energy anemic country was forced to turn to even more LNG imports. The situation for Japan over the next few years became dire as it’s growing gas demand forced spot prices in the region to new highs, breaching the $20 per million British thermal units (MMBtu) price point in February 2014 - with little relief in sight at the time.

In order to regain control over both exorbitant prices and unfavorable contract conditions, two of Japan’s largest electric utilities, Tokyo Electric Power and Chubu Electric formed JERA, a JV intended to combine both firms buying power to be able to strike more favorable deals. And it worked. Within a few years not only had the JV secured better LNG contractual terms but the group started trading the super-cooled fuel, a proposition that was unthinkable just a few years earlier.

Moreover, in the ensuing time, the somewhat limited supply of LNG that faced Japan in 2011 to around 2014 also ended, and a historic supply overhang of the fuel kicked in, mostly due to more production coming online from new Australian and U.S. projects. Now, Japan’s LNG imports are steadily falling amid these new market dynamics.

Fourth month of reduced LNG imports

Japan’s LNG imports fell for the fourth consecutive month in February, on a year-on-year basis, tumbling 11.4 percent to 7.35 million tonnes, according to trade figures released by the nation’s Finance Ministry on March 18. The pace of decline picked up from the 8.7 percent drop in January. Related: China Can’t Get Enough Of Brazilian Crude

Despite their volume falling, the imports’ price tag rose. In February, the cost of Japan’s LNG imports increased by 8.6 percent from a year earlier to about $4.19 billion (465.5 bn yen). LNG imports accounted for 7.7 percent of Japan’s overall imports in terms of value in February. In February, Japan imported 2.044 million tonnes of LNG from the 10-member Association of Southeast Asian Nations (ASEAN), which includes Indonesia and Malaysia, down 20.0 percent from a year earlier.

Japan imported 1.547 million tonnes of LNG from the Middle East, which includes Qatar, in February, up 1.8 percent year-on-year. Qatar is the world’s largest LNG exporter and has a liquefaction capacity of some 77 million tons per annum (mtpa), with that amount to increase to a staggering 110 mtpa by the end of 2023 or early 2024 as the countries continue to bring more production online from its already prolific North Field.

The Japanese Finance Ministry figures do not show the specific volume of LNG imports from Indonesia, Malaysia, Qatar and Australia, Japan’s largest LNG exporters. The ministry figures also showed that Japan’s LNG imports from Russia reached 604,000 tonnes in February, down 15 percent from a year earlier. Japan also imported 335,000 tonnes of LNG from the U.S. in February, up 139.6 percent year on year. Though Japan moved away from nuclear power in 2011 and subsequent years, this dynamic is easing off, though, as some nuclear reactors are being brought back online. The volume of Japan’s LNG imports in 2018 reached 82.854 million tonnes, down 0.9 percent from 2017. Related: Alberta Oil Inventories Rise Despite Production Cuts

Reverse arbitrage opportunities

Japan’s procurement of LNG on the spot market also dropped due to an unseasonably warm winter season in the northern hemisphere. Usually, spot prices for LNG in the Asia-Pacific region spike during cold winter months, enter a trough during the spring and trend upward again during hot super months as more air conditioning usage places a greater demand for gas.

Earlier this month, spot prices for LNG in the Asia-Pacific region plunged to multi-year lows as buyers spurned spot procurement of the fuel. Spot prices for LNG cargoes to be delivered into Northeast Asia in May fell last week to a nearly three-year low of $4.30/MMBtu, according to several trade sources.

The spot price for Northeast Asia LNG LNG-AS was last assessed at $4.65/MMBtu on March 21, Refinitiv Eikon data showed. The price quoted by the trade sources is the lowest since the week of April 15, 2016, when Refinitiv data showed it at $4/MMBtu, the lowest ever for data going back to 2010. Gas inventories in Asia are high, due to warmer temperatures this past winter, ample storage levels in Japan, China and South Korea, the region’s and the world’s three largest LNG importers, respectively, while buyers are shunning cargoes and re-directing them to Europe - a reverse arbitrage situation that historically has seen cargoes leave Europe for higher prices in Asia.

By Tim Daiss for Oilprice.com

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage



Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play