Nuclear Power Shutdown Pushes Japan to Global No. 1 LNG Importer

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--As Japan continues to develop a new, post-Fukushima nuclear power generation policy that all sections of national opinion can support, the bill for fossil fuel imports is rising, as coal and liquefied natural gas (LNG) are the baseload power fuel feeds.

Kansai Electric Power Company (OTC:KAEPY) (Tokyo, Japan) has announced massive purchase agreements for both coal and LNG, as it copes with uncertainty over when nuclear power plants will be allowed to restart or whether the goal to phase out nuclear power will actually be pursued. Another unknown in the mix is that the political scene will remain uncertain until a national election next month.

An agreement with BP Singapore has secured Kansai a supply of LNG over 15 years starting in 2017, with prices based on the price index of natural gas rather than crude oil. In the shorter term, the power utility has struck a one-year deal in conjunction with Kyushu Electric Power (OTC:KYSEF) (Tokyo, Japan) to purchase 1 million tons of coal from Oxbow Carbon (West Palm Beach, Florida) in the U.S.

Both Kansai and Kyushu have nuclear power units that are currently idled as the country's new nuclear regulator works to put in place a new legal safety framework prior to permitting reactors to restart. Kansai currently has 7,030 megawatts (MW) of nuclear generating capacity shutdown, and Kyushu has 5,000 MW idled.

Up until the accident at Fukushima in March 2011, Japan's energy policy had relied heavily on nuclear for baseload power, with fossil fuel generation providing added flexibility to meet peak load demands. Only two nuclear units, Kansai's Ohi 3 and 4, have been permitted to restart following the completion of a process of stress tests and approvals.

With a majority of its nuclear power plants out of service, Japan has been increasingly forced to place heavy reliance on imported fossil fuels for power generation, making Japan the world's largest consumer of LNG. The Japanese Ministry of Finance reports a continuing rise in LNG imports. In October, 6.7 million tons of LNG were imported, an increase of 8.6% from the same month last year. Also in October, 15.8 million tons of coal were imported, up 5%.

For related information, see November 8, 2012, article - Japan's Chubu Electric Negotiates with Long-Term LNG Suppliers.

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