Japan imports first LNG from China as utilities try to cut costs

The shipment shows the increasing flexibility of the Asian LNG market. (Reuters)
Updated 29 August 2019

Japan imports first LNG from China as utilities try to cut costs

  • Prices for spot LNG in Asia have sunk to near record lows in recent weeks as a wave of new supply from the US and Australia comes on to the market

TOKYO: Japan imported its first cargo of liquefied natural gas (LNG) from China in July as utilities from the world’s biggest buyer of the fuel seek out new suppliers and try to lower costs amid tough competition at home.

The shipment illustrates the increasing flexibility of the Asian LNG market. China has become the world’s second-largest LNG buyer amid a surge in domestic gas usage. However, the country has started to re-export shipments amid a lull in summer gas consumption and Japanese buyers are scooping up the cargoes to reduce their fuel expenses.

The cargo of 70,560 tons of LNG was shipped from the Hainan LNG Terminal, which is operated by state-owned CNOOC, to Chita near Nagoya, where Toho Gas jointly operates an LNG terminal with JERA, according to a source familiar with the matter.

It was delivered at $5.68 per million British thermal units (mmBtu), below Japan’s average import cost of $9.50 per mmBtu for LNG during July, according to Ministry of Finance data released on Thursday.

Toho Gas declined to comment when contacted by Reuters. CNOOC did not immediate reply for a request for comment.

A search through Japan’s official trade statistics shows it is the first LNG cargo from China since 1988, when the Japanese government started publishing import and export figures.

Prices for spot LNG in Asia have sunk to near record lows in recent weeks as a wave of new supply from the US and Australia comes on to the market.

The decline in spot market prices for liquefied natural gas (LNG) is pushing Japanese utilities in Japan to be more aggressive in price reviews built into traditional long-term contracts linked to oil prices.

They are also buying more LNG on the spot market as part of this shift in approach. Japanese utilities have previously favored stability of supply over price, partly because they could pass on the costs to consumers.

The liberalization of Japan’s energy markets means the old guard gas and electric utilities are losing customers to new entrants and they are trying to cut costs.

With summer temperatures peaking, Japanese electric utilities have also been rushing to replenish stocks of the fuel to use to generate power for air conditioning.

Hokuriku Electric has bought a spot LNG cargo for delivery in November, while Hokkaido Electric is seeking a cargo for delivery the same month, industry sources told Reuters this week.


UAE regulator not optimistic on Boeing 737 MAX return this year

Updated 52 min 38 sec ago

UAE regulator not optimistic on Boeing 737 MAX return this year

  • The 737 MAX has been grounded since March while Boeing updates flight control software
  • UAE airline flydubai is one of the largest MAX customers

DUBAI: The head of the United Arab Emirates’ General Civil Aviation Authority said on Sunday he was not optimistic that the Boeing 737 MAX would return to operations this year and that the first quarter of 2020 was more likely.
The 737 MAX has been grounded since March while Boeing updates flight control software at the center of two fatal crashes in Indonesia and Ethiopia that together killed 346 people within a span of five months.
Boeing is targeting regulatory approval for the fixes in October, though the US Federal Aviation Administration has said it does not have a firm time for the aircraft to be flying again.
The GCAA will conduct its own assessment to allow the MAX to return to UAE airspace, rather than follow the FAA, Director General Said Mohammed Al-Suwaidi told reporters in Dubai.
He said the GCAA would look at the FAA decision and that the UAE regulator had so far not seen details of Boeing’s fixes.
The FAA has traditionally taken the lead on certifying Boeing jets, though other regulators have indicated they would conduct their own analysis.
UAE airline flydubai is one of the largest MAX customers, having ordered 250 of the fast-selling narrow-body jets.
It has not said when it expects the aircraft to be operational again. American Airlines has canceled flights through Dec. 3, United Airlines until Dec. 19 and Southwest Airlines Co. into early January.