Japan's LPGas chief says US LPG could rise to 10-20% of total LPG imports
Tokyo (Platts)--11Dec2012/611 am EST/1111 GMT
Japan's imports of liquefied petroleum gas from the US could rise to
account for 10-20% of the country's total LPG imports, as it braces itself
for higher demand for city gas supplies, Japan LPGas Association Chairman Jun
Matsuzawa said Tuesday.
LPG purchases from the US now make up just 1.1% of Japan's total
imports, which in fiscal 2011-2012 (April-March) came to 12.63 million mt.
Matsuzawa declined to elaborate on the timing of the increase because
Japan is still unclear about the time lines for US supply capacities.
"Given increasing purchases of US-produced LPG by China, South Korea,
and South American countries, we are still uncertain about Japan's actual
purchase volumes," Matsuzawa told a news briefing in Tokyo.
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"However, if the US has an export capacity of around 10 million mt/year
[of LPG], Japan should be seen as a stable buyer with a payment credibility
and a trusted trade partner [of the US], so that we estimate the purchase
volume to be about 20%."
The Japan LPGas Association expects to see a hike in LPG supplies from
the US as a result of increasing production of shale-gas based LPG in the
country, coupled with expected expansion at the Panama Canal in early 2015.
The canal expansion would reduce the freight costs of Japanese LPG
imports from the US as it would allow buyers to load LPG in 45,000 mt VLGCs
and cut voyage days to 22 from around 40-45 days currently, going around the
Cape of Good Hope in Africa.
BLENDING DEMAND SEEN RISING
Matsuzawa said LPG demand for city gas supplies in Japan is expected to
rise by 20-30% from current levels for blending into lean gas-based LNG for
Currently, Japan's LPG demand for city gas supplies is about 1 million
mt/year, and it is expected to rise to around 1.2 million mt/year in fiscal
2012-13, the association said.
City gas utilities typically blend LPG into regasified lean gas to
increase calories for city gas supplies. Industry sources said that
approximately 200,000 mt/year of LPG is currently mixed into LNG.
Matsuzawa's comments came at a time when Japan is expected to hike its
imports of lean gas-based LNG from North America at Henry Hub-linked gas
prices in a bid to lower its increasing costs of LNG, most of which is linked
to more costly oil-price indexation. Henry Hub prices are currently well
below oil-linked LNG prices.
The country recorded its first annual trade deficit in 31 years in 2011,
attributed in part to the fact that it imported a record 78.5 million mt/year
of LNG at relatively high prices, in part to make up for lost nuclear output
after the Fukushima nuclear disaster.
Japanese companies have secured options to import up to 15 million
mt/year of LNG from North America, which could start from as early as 2016,
although formal contracts are yet to be finalized, the Japanese government
The possible 15 million mt/year LNG imports from North America would
account for roughly 20% of the country's current import volumes.
However, Japan's actual LNG imports particularly from the US are subject
to approvals from the US Department of Energy to allow LNG exports to
non-free trade agreement countries like Japan.
The DOE has approved a number of applications to export LNG to countries
with which the US has a FTA, but has only approved Cheniere Energy's Sabine
Pass project in Louisiana for export to non-FTA countries, including Japan.
Market sources said the higher demand for LPG would require Japan to
widen its supply sources and not limit itself to the Middle East, where Saudi
Arabian LPG exports are limited by domestic petrochemical demand and supplies
from Iran are curbed by concerns over Western sanctions.
In the fiscal year ended March 31, Japan imported 11.012 million mt of
LPG from the Middle East, accounting for 87% of total LPG imports,
association data showed.
Earlier Tuesday, Japan's Nikkei newspaper reported that the country's
top LPG importer, Astomos Energy Corp, aims to increase its purchases from
the US to 2 million mt/year by around 2015, which would be about 15% of the
country's current LPG imports. An Astomos Energy spokesman denied the Nikkei
report on the company's planned hike in LPG imports from the US with the
reported time line.
Astomos Energy had said in October it would purchase 530,000 mt/year of
US-produced LPG from Enterprise from 2015, which accounts for around 5% of
Japan's annual import volumes.
The deal is three times above its existing contract volumes, in which
Astomos buys three to four 44,000 mt cargoes each year from Enterprise, which
began in 2008, market sources had said.
In July, Japan's second-largest LPG supplier Eneos Globe agreed with
Enterprise Products Partners to import up to 200,000 mt of refrigerated LPG
from 2014, and was considering increasing volumes.
Asked to comment on a possible Iran crisis as a result of the
deteriorating geopolitical situation and its impact on energy supplies
passing through the Strait of Hormuz, Matsuzawa said Japan did not expect to
see any impact on its LPG supplies.
"We should not be panicking on LPG supplies because we should be able to
release strategic stocks in cooperation with the government in the event of
supply disruptions," Matsuzawa said.
Japan won't have imported any LPG from Iran in the current fiscal year
ending March 31, 2013, he added.
Currently, Japan has around 3 million mt of LPG, or 100 days' worth of
import volumes in its strategic stocks, where the country holds 1.5 million
mt, and the private sector holds the remaining balance, according to the
Japanese LPG association.
--Takeo Kumagai, firstname.lastname@example.org
--Ramthan Hussain, email@example.com
--Edited by James Leech, firstname.lastname@example.org