Several power utilities in the market to buy spot LNG
Set to focus on long-term contracts in 2022 amid high spot prices
But remain prone to spot purchase on contingency, limited storage
Japanese power utilities are scrambling to secure LNG cargoes in the spot market, as they seek to ensure adequate supply through the winter demand season following weeks of elevated power demand, market sources told S&P Global Platts.
Not registered?
Receive daily email alerts, subscriber notes & personalize your experience.
Register NowWith snow storms hitting the country in recent weeks and unexpected outages at coal-fired power plants amid prolonged uncertainty over Indonesia's coal exports following the recent blanket export ban, gas for power burn has been high.
LNG stocks held by major power utilities fell 6.9% on the week to 2.01 million mt on Jan. 16, according to the latest data from the Ministry of Economy, Trade and Industry, underlining the ongoing depletion of stocks seen over the last few weeks.
One Japanese power utility has already bought multiple spot LNG cargoes for February delivery, while a few other utilities are still seeking a couple of spot LNG cargoes for February or March delivery, market sources said.
"More electricity is being purchased on the grid so our consumption of LNG is also increasing," a Japanese power utility said. "We are considering a cargo in case demand remains strong, although our LNG spot demand is not firm yet."
"Unless it becomes really warm in February and March, the impact on LNG inventory is [likely to be] quite big," a Japanese power utility said. "It will be a tough situation for buyers like us to buy spot LNG."
The Japanese power utilities' appetite for spot LNG cargoes follows a sharp depletion in the LNG stocks, which had fallen below the country's seasonal low for power generation during the last autumn, coupled with a recent drop in spot LNG price.
The Platts JKM benchmark for Asian LNG was assessed at $18.945/MMBtu on Jan. 20, compared to $21.534/MMBtu on Jan. 17, having mainly trended lower since the start of the year. The benchmark has more than halved since reaching an all-time high of $56.326/MMBtu on Oct. 21, 2021, as it was propelled higher by fierce competition between Atlantic and Asia-Pacific demand centers for marginal cargoes ahead of the winter.
"I don't think there are utilities with surplus inventory. Downstream demand was strong since Christmas," a Japanese power utility said. "I think buyers are just doing everything else to avoid spot. Everyone prepared for December-January but I don't think many Japanese utilities are covered for March."
2022 supply
Looking ahead, Japanese power utilities are expected -- as usual -- to focus on trying to meet their LNG requirements mostly from long-term contracts in 2022, especially in light of the record-high prices seen in the spot market during 2021, but it is likely that spot purchases will still feature.
"I expect Japanese will use any UQTs [upward quantity tolerances] they can exercise for their long-term contract," said a Japanese power utility, adding that long-term contracts will still play a major role for most Japanese importers in the next few years.
Another Japanese power utility said it had already filled its spot LNG requirement from mid-term contracts for 2022.
S&P Global Platts Analytics' Jeff Moore said that Japanese power utilities would likely still need to secure additional LNG both from spot and other contracts in 2022 because of long-term contractual expiries, as well as ongoing high spot LNG prices.
"Japan has a number of expiring LNG contracts this year, with more than 5 million mt/year of contracts rolling off, which could create additional spot exposure for some end-users," Moore said.
"Given the current spot price environment and the expectation that JKM will stay above the $15/MMBtu mark for the majority of the year, it seems reasonable to expect that some end-users in Japan could look to sign up for some short or medium-term contracts."
"I still think it will be a rarity for many Japanese long-term contracts to be signed given the uncertainties around demand, but there is a high potential for some participants to look to increase their contracted capacity this year."
Platts Analytics expects Japanese LNG consumption in the power markets to average 175 million cu m/d in 2022, up from an average of 165 million cu m/d in 2021 largely due to higher overall power demand expected this year.
Storage capacity
The Japanese power utilities' latest spot LNG buying spree for the current winter also underlined their vulnerability to such contingency as more than expected demand from unplanned outages of other power and fuel sources due in part to their limited storage capacity over requirements.
"Every year, we prepare high stock fuel stocks for winter but demand and other power generator outages can easily draw down inventory," a Japanese power utility said. "We don't have that much storage capacity like gas utilities do."
Japan's LNG storage capacity for power generation did not grow in line with the growth in gas-fired power demand since the 2011 Great East Japan Earthquake, which resulted in years of uncertainty over the restarts of the country's nuclear reactors, Yutaka Shirakawa, project director of LNG information team at the Japan Oil, Gas and Metals National Corp., told Platts.
"LNG storage capacity needs to be increased physically when its requirement grows," said Shirakawa, adding that Japan's LNG storage capacity held by power utilities currently stands at about 5.4 million mt. "In response to such issue, a conventional means is to construct additional LNG storage tanks but [any] decision [on building more] is increasingly becoming difficult because of accelerated moves toward decarbonization."
In his report published June 2021, Shirakawa proposed the idea of building LNG storage tanks and using LNG tankers as storage among possible measures in response to the tightened power-supply balance Japan experienced last January due to low LNG stocks.
"spot" - Google News
January 21, 2022 at 09:23PM
https://ift.tt/3FOSpwd
Japan's power utilities scramble for spot LNG as inventory drops - S&P Global
"spot" - Google News
https://ift.tt/2sMidK2
https://ift.tt/3c9XpgI
Bagikan Berita Ini
0 Response to "Japan's power utilities scramble for spot LNG as inventory drops - S&P Global"
Post a Comment