- TOKYO: Japan needs to buy more liquefied natural gas (LNG) even after securing four million tons of additional fuel from top producer Qatar, which is likely to push long-term prices higher and reduce cargoes available for Europe.
Top LNG importer Japan is battling to minimize power shortages in the aftermath of a devastating earthquake and subsequent tsunami in March that knocked out more than 9 gigawatts of nuclear power supply.
“Additional purchases from the utilities will tighten the supply and demand balance, but the market was originally oversupplied, with about 40 to 50 million tons said to be in surplus globally,” Mitsunori Torihara, Chairman of the Japan Gas Association, told a news conference.
“A rise in LNG prices will be unavoidable from now on, but in terms of volume, there is no need to worry,” said Torihara, who also serves as Chairman of Tokyo Gas Co Ltd.
Qatar state-run energy firm Qatargas will supply more than 60 extra cargoes of LNG, or 4 million tons, to Japan over the next 12 months, the company said on Saturday.
Japan may need to buy as much as 10 million tons of additional LNG, so the Qatar purchase would likely be followed by more, one industry source said on Monday. Industry estimates of the volume of additional LNG it needs range from the 4 million tons per year its has bought from Qatar to 10 million tons per year.
Global gas supply is ahead of demand. The International Energy Agency estimates it could take years to work off the extra supply.
Japan is eating into that spare capacity as it looks to plug its power supply shortage after the quake, although analysts say it is unlikely to be enough to remove the global gas glut.
Still, traders expect LNG prices in the region to strengthen on the Japan purchases.
“If Qatar diverts to Japan more than 60 cargoes that it had contractually committed to others, that would have a big impact on spot and long-term prices,” said a source in LNG trading at a Japanese trading house.
“The more (extra supplies) the better. Many Japanese trading houses, electric power companies and gas firms invest in Qatar, so I think Qatar decided to support Japan considering those partnerships,” the source said.
The extra cargoes from Qatar would be shipped to a number of Japanese utilities and not limited to Tokyo Electric Power (TEPCO) and Tohoku Electric Power, the worse affected by the quake, industry sources said.
Other utilities in Japan will need to boost runs at thermal plants to supply power to the two firms.
Japanese gas and power firms would also continue to divert LNG cargoes to TEPCO, Torihara said.
TEPCO is using gas turbines to increase power supply and plans to bring more gas-fired power capacity online to help it meet the supply shortage caused by the shutdown of nuclear and other power plants after the quake.
Japan has negotiated extra supplies from a variety of producers as well as Qatar, including Russia, Malaysia and Indonesia. It has also arranged additional supplies through time swaps with Korea Gas Corp (KOGAS) and Taiwan’s CPC.
Last year, Japan imported a record 70 million tons of LNG and Qatar was its fourth-biggest supplier, shipping 7.63 million tons.
The nation’s 10 main electric power firms imported 43.92 million tons of LNG, a record, in the financial year ended in March, using 95 percent of that for power generation.
Qatargas has long been a supplier of LNG to Japan. Qatar’s other state-run LNG supplier, Rasgas, holds no long-term contracts with Japan but has supplied cargoes to Japan via Qatargas since the quake, a company executive said earlier this month.

