Japan reports falling demand for imported LNG


Japan's demand for imported natural gas, which ballooned after the 2011 Fukushima Daiichi nuclear disaster, is falling -- and may deflate a lot further if the government succeeds in getting dozens of idled nuclear reactors restarted.

Imports of liquefied natural gas in the first half of 2013 were down 2.7% to 43.4 million tons, the first half-yearly decline since the nuclear accident more than two years ago, the ministry of finance reported Wednesday. Last year, imports were up 11%, to 87.3 million tons, after a 12% rise in 2011.

The reversal of the trend is bad news for companies developing or planning LNG export facilities in locations as varied as Australia, Russia, East Africa or North America. Japan is the world's top LNG importer.

But bad news for gas producers could be good news for coal miners in those same regions. With all but two of 50 licensed reactors idle, what's currently capping Japan's use of imported LNG -- which has been generating 40% of its electricity -- is in part heavier use of coal.

Utilities have repaired some earthquake-damaged coal-fired power plants and built new ones that can produce electricity more cheaply than gas-fired plants. In April, Tokyo Electric Power Co., operator of the Fukushima reactors, started making electricity at two new coal-fired 1.6-gigawatt power stations. Tohoku Electric Power Co. has restarted two coal units with a combined two gigawatts of capacity since late last year.

The chief executive of one of Australia's largest miners, Whitehaven Coal, said recently he is targeting Japan over big buyer China for future thermal-coal sales because Japan's tight environmental controls means demand for high-quality, less-polluting Australian coal over cheaper varieties from elsewhere.

"LNG demand may not fall sharply," said Tomomichi Akuta, analyst at Mitsubishi UFJ Research & Consulting, "but it won't rise any further even if nuclear power doesn't come back soon."

What could turn the slippage in demand into a real tumble would be the realization of the ruling Liberal Democratic Party's enthusiasm for restarting reactors.

"It depends on when and how many reactors the authorities approve," said Hidetoshi Shioda, analyst of SMBC Nikko Securities. Japan's Institute of Energy Economics, a think tank, last year forecast that restarting 26 reactors would cut LNG demand 8.8% the following year.

Utilities have asked Japan's Nuclear Regulation Authority to clear an initial 12 reactors for restart, on the grounds they meet new safety regulations.

But there are hurdles, including public hostility. Pro-nuclear Prime Minister Shinzo Abe may be flying high, coming off a big election win Sunday for his ruling party, but he hasn't managed to overcome the resistance to nuclear power. A poll by Asahi newspaper a week ago showed 58% opposition to restarting any reactors.

Dow Jones Newswires

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