Ample LNG stocks at Japan power utilities offer relief

Ample LNG inventories at Japan's main power utilities will bring some relief to the country's power sector as the peak winter demand season approaches, especially as spot LNG prices remain firm.

Utility LNG stocks were at the highest level in five years as of 15 October at 2.3mn t, although this was down slightly from around 2.5mn t at the end of September, according to a survey by the country's trade and industry ministry (Meti). But this was higher by 44pc from a year earlier and by 28pc from the four-year average for that time of year.

Meti expects a low likelihood of Japan facing a power shortage this winter given current LNG stock levels. The power sector could avoid a repeat of the power shortages it experienced earlier this year even in the event of a cold snap if each utility continues to import LNG, the majority of which is procured under long-term contracts, as planned, Meti said.

Japan's power agency the Organization for Cross-Regional Coordination of Transmission Operators estimates that Japan will have around a 4pc surplus in electricity supplies of 9,668GWh, which can meet demand for about 3.5 days, at the end of February 2022 even if the coldest weather in the past decade hits the country. This was based on utilities' current fuel procurement plans and an unspecified ratio of unscheduled shutdown of power plants.

At the same time Meti has warned that there remains a risk of Japan experiencing a power shortage if demand increases by more than expected and there is a large-scale disruption to power supplies. The government has called for cooperation among LNG importers on effective and flexible procurements in the event of an emergency.

Japanese utility Kyushu Electric Power recently agreed to partner up with domestic upstream firm Inpex and Thailand's state-controlled trading firm PTT on LNG optimisation to prepare for emergencies such as supply tightness.

LNG inventories at Japanese gas utilities, another major LNG consumer, also built up during the off-peak summer gas demand season. LNG stocks for city gas production stood at around 1.97mn t at the end of August, up by 2pc from about 1.93mn t a year earlier and by 9.4pc from around 1.8mn t, an average for the same period during 2015-19, according to a preliminary data from Meti.

Gas utilities did not suffer from any shortage of LNG and city gas supplies in January, unlike the power sector. Gas retailers instead helped supply LNG to power utilities upon request from the government.

By Motoko Hasegawa