Japan is considering stepping up purchases of liquefied natural gas (LNG) for emergency needs to at least 12 cargoes a year from three now, an official of its industry ministry said, to guard against unexpected supply shocks.
The reserve-boosting plan entails additional purchases by the world’s second biggest buyer of LNG after China, increasing its buys to at least 0.84 million tonnes of LNG per annum from 0.21 million now.
Japan is expanding its role as an LNG trader at a time of falling domestic demand overall for the fuel, but in a plan to boost energy security, it trades some cargoes that are not wanted at home during periods of weak demand.
From last December, Japan’s top power generator, JERA, has bought one LNG cargo for each of the winter months, or a total of three for the year, to add to a ‘Strategic Buffer LNG’ (SBL) run by the Ministry of Economy, Trade and Industry (METI).
This winter, JERA will continue buying one cargo of 70,000 metric tons for each month from December to February, Yuya Hasegawa, director of the ministry’s energy resources development division, told Reuters.
“From the mid- to late-2020s, we will try to secure at least one cargo per month throughout a year – that is, at least 12 cargoes per year,” Hasegawa said, adding that JERA, also Japan’s top LNG buyer, would continue handling cargoes for the reserve.
Japanese power utilities have been calling for a bigger SBL, designed for JERA to provide a cargo to a utility in urgent need, hedging against unexpected supply crunches triggered by military conflicts or nuclear reactor halts, among other issues.
Australia is Japan’s top LNG supplier by far, but the Middle East, including Qatar and Oman, provided 14% of its August needs of the super-chilled gas, Japanese customs said, with Russia supplying another tenth.
Japan has no underground gas storage but has LNG storage capacity of around 12 billion cubic meters, or just over a month of consumption, at its LNG receiving terminals, which number more than 30, the International Energy Agency says.
To boost storage capacity, METI proposed financial support last month for companies to secure storage tanks at home and abroad, in a scheme separate from the SBL but which also aims to improve energy security.
LNG makes up a third of the power generation mix in Japan, which sees it remaining as a transition energy source in the years to come. Japanese companies have recently also expanded LNG swap deals in efforts to boost flexibility.
(Reporting by Katya Golubkova; Additional reporting by Yuka Obayashi; Editing by Clarence Fernandez)