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.


Saudi energy giant to invest $3bn in Bangladesh’s power sector

Updated 22 October 2019

Saudi energy giant to invest $3bn in Bangladesh’s power sector

  • Experts say deal will usher in more economic and development opportunities for the country

DHAKA: Saudi Arabia’s energy giant, ACWA power, will set up an LNG-based 3,600 MW plant in Bangladesh after an agreement was signed in Dhaka on Thursday.

The MoU was signed by ACWA Chairman Mohammed Abunayyan and officials from the Bangladesh Power Development Board (BPDB), officials told Arab News on Monday.

According to the agreement, ACWA will invest $3 billion in Bangladesh’s energy development sector, of which $2.5 billion will be used to build the power plant while the rest will be spent on an LNG terminal to facilitate fuel supply to the plant. Under the deal, ACWA will also set up a 2 MW solar power plant.

In recent months, both countries have engaged in a series of discussions for investment opportunities in Bangladesh’s industry and energy sectors. 

During the Saudi-Bangladesh investment cooperation meeting in March this year, Dhaka proposed a $35 billion investment plan to a high-powered Saudi delegation led by Majed bin Abdullah Al-Qasabi, the Saudi commerce and investment minister, and Mohammed bin Mezyed Al-Tuwaijri, the Saudi economy and planning minister.

However, officials in Dhaka said that this was the first investment deal to be signed between the two countries.

“We have just inked the MoU for building the LNG-based power plant. Now, ACWA will conduct a feasibility study regarding the location of the plant, which is expected to be completed in the next six months,” Khaled Mahmood, chairman of BPDB, told Arab News.

He added that there are several locations in Moheshkhali, Chottogram and the Mongla port area for the proposed power plant.

“We need to find a suitable location where the drift of the river will be suitable for establishing the LNG plant and we need to also consider the suitability of establishing the transmission lines,” Mahmood said.

“It will be either a JV (Joint Venture) or an IPP (Independent Power Producer) mode of investment, which is yet to be determined. But, we are expecting that in next year the investment will start coming here,” Mahmood said.

BPDB expects to complete the set-up process of the power plant within 36 to 42 months.

“We are in close contact with ACWA and focusing on the successful completion of the project within the shortest possible time,” he said.

Abunayyan said that he was optimistic about the new investment deal.

“Bangladesh has been a model for the Muslim world in economic progress. This is our beginning, and our journey and our relationship will last for a long time,” Abunayyan told a gathering after the MoU signing ceremony.

Economists and experts in Bangladesh also welcomed the ACWA investment in the energy development sector.

“This sort of huge and long-term capital investment will create a lot of employment opportunities. On the other hand, it will facilitate other trade negotiations with the Middle Eastern countries, too,” Dr. Nazneen Ahmed, senior research fellow at the Bangladesh Institute of Development Studies (BIDS), told Arab News.

She added that Bangladesh needs to weigh the pros and cons before finalizing such contracts so that the country can earn the “maximum benefits” from the investment.

“It will also expedite other big investments in Bangladesh from different countries,” she said.

Another energy economist, Dr. Asadujjaman, said that Bangladesh needs to exercise caution while conducting the feasibility study for such a huge investment.

“We need to address the environmental aspects, opportunity costs and other economic perspectives while working with this type of big investment. Considering the present situation, the country also needs to focus on producing more solar energy,” Dr. Asadujjaman told Arab News.