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Japan's power utilities buy record 26 mil mt LNG in Apr-Sep

By Takeo Kumagai in Tokyo

October 18, 2011 - Japan's 10 major power utilities bought a record high 26.16 million mt of LNG over April-September as they hiked gas-fired power generation to make up for a shortfall in their nuclear output, according to a Platts analysis of data released October 14 by the Federation of Electric Power Companies.

The Japanese power utilities also consumed a record high 24.73 million mt of LNG in the period, the first half of the current fiscal year ending March 2012, and generated 267,525 GWh of electricity from their thermal power plants, up 12.6% year on year.

The power utilities' LNG purchase and consumption volumes in the April-September period were up 21.3% and 20.9%, respectively, from a year ago, according to FEPC data. (See related table: Fuel consumption and procurement by Japan's 10 major power firms: Sep 2010 & Sep 2011).

Analysis continues below...

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"The April-September LNG purchase and consumption by Japanese power utilities were within our expectations," said Hiroshi Hashimoto, a senior researcher at the Institute of Energy Economics, Japan.

During the six months to September 30, the power utilities bought 8.43 million kiloliter of crude and fuel oil (53.02 million barrels or 290,000 b/d), up 49.7% from a year ago, while their oil consumption jumped 27.2% year on year to 7.44 million kl, FEPC data showed.

Fuel consumption and procurement by Japan's 10 major power firms: Sep 2010 & Sep 2011

The 10 power utilities' LNG purchase volumes in the April-September period were an all time high in any six-month period, surpassing a record procurement volume of 22.35 million mt of LNG in October 2010-March 2011.

The April-September LNG purchase volumes were also the highest for that part of the year since they bought 21.10 million mt in April-September 2007. (See related table: Fuel consumption and procurement by Japan's 10 major power firms: Apr - Sep, 2010 & 2011).

Japan's monthly LNG imports have been rising steadily year on year, even during the country's off peak demand season over April-June, as Tokyo Electric Power Company and Tohoku Electric lost more than 11 GW of nuclear capacity at their Fukushima and Onagawa facilities, respectively, due to the devastating earthquake and tsunami in the northeast on March 11.

In the wake of the March earthquake, the country's overall LNG import prices have been rising due in part to increased demand for spot LNG supplies but mainly to rising crude oil benchmarks.

Japan's LNG import prices: Sep 2010 - Sep 2011

In Japan, the formulae in long term contracts usually take the form of a percentage of the Japan Customs Cleared, or JCC crude oil price, plus a fixed differential.

As a result, the Japan LNG Cocktail, or JLC price has been rising steadily since March at $12.387/MMBtu to $16.372/MMBtu in August, according to the Ministry of Finance. Japan's custom cleared import volume and price data are not yet available for September as yet.

The earthquake has also led to unexpected consequences, such as Chubu Electric's imposed shutdown of its sole Hamaoka nuclear power plant in May.

Over April-September, Tepco, the country's largest power utility, bought a record 11.829 million mt of LNG and consumed a record 11.337 million mt, up 14.3% and 16.8%, respectively, from a year ago.

Tohoku Electric also consumed a record 2.153 million mt of LNG in the six-month period, up 90% from 1.131 million mt in a year earlier, a company official said.

Chubu Electric bought 6.23 million mt and consumed 5.6 million mt of LNG in the six months to September 30, up 27.7% and 23%, respectively, from a year ago, a company official said.

Next page: LNG Outlook for fiscal 2011-12

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