Risk of power shortages pressures Japan to secure LNG

Japan is facing greater pressure to ensure stable LNG supplies to avoid electricity shortages during the summer and winter peak demand seasons, because of growing concerns about energy security in the wake of Russia's invasion of Ukraine.

Japan's power sector may not be able to provide enough thermal output to meet demand, if sufficient fuel supplies are not procured, according to a document presented at a ministerial meeting held on 7 June. The country's energy security is in an unpredictable situation because of increasing risks of Russian LNG supply disruption, the document said.

Tokyo has so far emphasised its plan to maintain its stakes in Russia's Sakhalin 1 crude and Sakhalin 2 LNG projects, as well as the Arctic LNG 2 project to ensure Japan's energy security. But it has pledged to reduce its reliance on Russian energy in line with the G7 group of major economies.

The government has highlighted the fuel procurement risk, as the country faces possible electricity shortages during the upcoming summer and winter periods. Tokyo aims to strengthen its initiative to ensure a stable supply of thermal fuels, especially LNG, but it is still unclear how the government will play a role in fuel procurements. Details will be discussed later, a trade and industry ministry (Meti) official said.

All of Japan's 10 service areas are forecast to have a minimum 3pc of surplus electricity supply for July-September, even if the hottest weather in the past decade hits the country. But such reserve levels in Tohoku, Tokyo and Chubu are estimated at just 3.1pc. The situation is expected to worsen further in winter, when the Tokyo area is predicted to face a supply loss against demand of 0.6pc for January and 0.5pc for February, in the case of the coldest weather in the past decade.

The government is calling for power saving efforts from all the sectors, without setting a numerical target for this summer, while gearing up to secure enough generation capacities and output through public tenders, thorough maintenance checks to avoid unplanned shutdowns, and regular monitoring activities by authorities.

Japan's main power utilities had 1.99mn t of LNG stocks as of 29 May. This was up by 2.6pc from 1.94mn t at the end of May 2021 and up by 0.5pc compared with 1.98mn t — the average level of end-May stocks in the last five years, according to Meti's weekly survey.

By Motoko Hasegawa