Japan Quake May Mean Extra 12 Million Tons of LNG

Source: Bloomberg, Dinakar Sethuraman  (5/11/11)

"Increased buying to compensate for 11 GW of lost generation capacity."


Bloomberg, Dinakar Sethuraman

Liquefied natural gas imports by Japan may rise by 12 million metric tons a year after the nation's worst earthquake on record led to the closure of nuclear power facilities and higher demand for gas-fired generation, Arctic Securities ASA said.

The increased purchases include 9 million tons to compensate for 11 gigawatts of Tokyo Electric Power Co.'s generation capacity lost in the March 11 quake and tsunami. The remainder is to make up for Chubu Electric Power Co.'s plans to close 3.5 gigawatts for at least two years, Erik Stavseth, an analyst for Oslo, Norway-based Arctic, said in a note emailed yesterday. Japan imported 70 million tons of LNG in 2010, according to customs data.

The nuclear disaster at Tokyo Electric's Fukushima Dai-Ichi plant, the world's worst in 25 years, triggered global concern that atomic power plants aren't adequately protected against natural disasters. Chubu Electric will close its Hamaoka plant while it's fortified to withstand a tsunami similar to the one two months ago.

Japan's additional LNG is equivalent to about 6% of a market that was 200 million tons last year, according to the note. It may boost world LNG demand growth to 13% a year, Stavseth wrote.

The shipping market for the fuel is "tight" as there is "highly limited availability" of tankers in the next 12–24 months, Arctic said, citing Mitsui OSK, which it said holds stakes in 25% of the global LNG fleet.

"This situation is likely to lead to a significant increase in short-term charter rates and benefit independent owners with open tonnage," Stavseth said. "Few vessels are coming off charter in the next two years. More in 2013, but the majority are smaller vessels unsuitable for conversion and long- haul trade."