Role of Liquefied Natural Gas in Japanese Power Mix Becomes More Significant

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Researched by Industrial Info Resources East Asia (Kofu-shi, Japan)--On September 11, Japan solemnly remembered the six-month memorial for the March 11 earthquake and tsunami. Since then, the country has been embroiled in an ongoing nuclear and power crisis tempered with political upheaval and infighting. Political trouble has slowed disaster relief and reconstruction alike, as well as the revival of the country's electrical infrastructure. Currently, only 10 of Japan's 54 commercial nuclear reactors are online, with no clear plans for restart. Of those that are offline, at least 10, consisting of reactors from Fukushima Daiichi and Fukushima Daini, will be decommissioned.

Most other tsunami-damaged power facilities are back up and running, but as the country's nuclear capacity dwindles, long-term power shortages are becoming serious concerns. Tokyo Electric Power Company Incorporated (TYO:9501) (TEPCO) (Tokyo) and Tohoku Electric Power Company Incorporated (TYO:9506) (Tokuden) (Sendai, Japan), the hardest-hit utility companies, were able to make it through some one of the hottest times of the year with less power due to the emergency additions of gas-fired and diesel-fired capacity.

Conservation has played a heavy role as well. At the beginning of July, the government imposed mandatory power cuts on large electricity consumers in service areas of TEPCO and Tohoku, and encouraged residents to conserve power as well. By the beginning of September, the government lifted the power cuts for these areas, several weeks earlier than expected.

As of now, utility companies are foreseeing little trouble during the peak winter season, even with the loss of five more reactors. Imports and usage of liquefied natural gas (LNG) have risen sharply since March 11, and utility companies are in the process of securing cargo for the winter season. More gas-fired capacity is being added as well. Industrial Info is currently tracking more than $14 billion in active gas-fired projects scheduled to come online over the next two years. Tokyo prefecture is planning the construction of an LNG-fired power station of its own, more than likely to see development along Tokyo Bay where several LNG terminals are located.

Though Japan's nuclear fleet could see restarts within the next six months, the country is still looking to phase-out nuclear energy. As LNG eclipses coal in Japan, gas-fired capacity will become extremely important as Japan boosts its renewable energy base over the next ten years. Japanese utility companies are currently signing contracts with oil and gas companies that are invested in major LNG projects, particularly those in the Pacific region. INPEX Corporation (TYO:1605) (Tokyo), which is planning its $38 billion Ichthys project in Western Australia, is currently building a new import and regasification terminal on the western coast of Japan in order to boost the country's import terminals. Japan currently has approximately 40 operational LNG terminals and is the largest importer of LNG in the world.

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