Wednesday, July 24, 2013

Japan's Import of LNG Decreases

The Wall Street Journal reported that Japan, the world's largest importer of liquefied natural gas (LNG), has seen natural gas imports slide since the first half of 2012.  Gas imports spiked following the disaster at the Fukushima Daiichi nuclear plant caused by the earthquake and subsequent tsunami hit the island nation in March 2011.  Japan shut down 48 of its 50 nuclear reactors and largely has been dependent on imported fuel sources.

Demand for imported gas peaked in the first half of 2012 and has been sliding ever since, mostly because over the past two years Japan has increased its use of coal, which is cheaper than imported gas.  As Japan gets closer to restarting some of its idled nuclear reactors, gas imports should continue to decline.

This news does not bode well for the worldwide LNG market.  In addition to the 20 or so projects planned in North America and a multitude of other planned projects worldwide, a decrease in demand from the world's biggest importer should be a cause for deep concern.  It further indicates that the window of opportunity for North American gas imports is narrow and the number of viable projects is also pretty small, possibly limited to the handful of locations already built out for gas imports (at least in the U.S.).  I'm sure Dow and the other big domestic manufacturers are breathing at least a small sigh of relief to know that most domestic natural gas will remained stranded in North America.

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