Japan's government is amending laws that will allow state firm Japan Oil, Gas and Metals National Corporation (JOGMEC) to buy liquefied natural gas this winter if private companies cannot afford to do so, Industry and Trade Minister Yasutoshi Nishimura said on Friday.
Japan and all other large importers of LNG in Asia have been in intense competition with Europe this year to procure gas cargoes as the EU races to replace Russian pipeline supply while Russia has significantly restricted its gas exports to Europe.
Japan's new legislation also allows the trade and industry minister to order gas use restrictions at large consumers if supply further tightens or in case of a gas emergency, Nishimura said at a news conference carried by Bloomberg.
Japan is heavily dependent on imported energy for a lack of local resources. Amid the current crunch following the Russian invasion of Ukraine and the Western sanctions on Russia, Japan is even considering giving nuclear a second chance in a reversal of the stance Japanese leaders have had since the 2011 Fukushima disaster.
The heightened competition of LNG supply just ahead of the winter has sent LNG prices high, and freight rates to record highs, as Europe looks to import as much gas as it can to avoid a winter of blackouts and rationing. Higher prices in Europe have so far this year drawn more spot LNG supply there, unlike in previous years when Asia with its top importers Japan and China dictated demand on the LNG market.
Earlier this week, LNG carrier rates hit an all-time high, driven by growing prompt demand for gas in Europe as the continent tries to procure supply ahead of the winter. The freight rate to charter an LNG carrier in the Atlantic basin surged to $397,500 per day on Tuesday, according to Spark Commodities estimates. The race to buy LNG and charter LNG carriers could create the next big shortage in the energy market-not enough vessels to transport LNG from exporters to buyers, analysts and traders say.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More