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Japan nuclear delays lift LNG prices

Spot LNG prices rose this week, after Japan delayed the restart of some nuclear power plants while also bringing in more gas-fired turbines to meet summer electricity demand.

Spot LNG prices rose this week, after Japan delayed the restart of some nuclear power plants while also bringing in more gas-fired turbines to meet summer electricity demand.  

Kyushu Electric Power (Kyu-den) and Kansai Electric Power (Kan-den), electricity suppliers to western and southern Japan where the earthquake impact was minimal, said extensive safety checks will delay the restart of four nuclear-power units. These delays were behind the brief spike in spot LNG prices over the past week, traders said.

“Tepco (Tokyo Electric Power) bought April and May cargoes then demand eased a little. But Kyu-den and Kan-den, which could not restart nuclear units, picked up cargoes at relatively high prices,” a Japanese LNG trader said.

Spot LNG prices briefly spiked to just below $13/million British thermal units (Btu) then dipped to just above $12/million Btu, compared with $11.50-12.00/milion Btu the week before.

Japanese spot demand is expected to remain healthy, providing a floor to Asian spot prices, although a potential bearish factor could be the re-routing of tankers from Europe because UK gas prices have started falling, traders said.

The UK gas contract for May delivery was around £0.5535 a therm, or about $9.10/million Btu. “The level is enough to open up the arbitrage [to Asia from Europe], although the shortage of LNG tankers might create a significant bottleneck,” the trader said.

Tepco also announced last week that it would install two gas turbines, with combined capacity of 211 megawatts (MW), in Ohi by July and another 128 MW gas turbine in Kawasaki by August. The company did not specify if the gas that will fuel the new installations will be sourced from existing long-term LNG contracts or from additional spot volumes.

Tepco has also restarted one oil-fired power plant, which had been shut following the the 11 March quake. All of Tepco's and Tohoku Electric Power’s quake-affected nuclear power plants remain shut, while those nuclear units taken off-line for regular maintenance are not yet due to restart.

The utilisation rates of Japan’s commercial nuclear power plants averaged 58.3% in March, down from 70.8% in February, according the statistics from industry group, the Federation of Electric Power Companies of Japan.

In eastern and northeastern Japan, the area most affected by the quake, the lack of nuclear generating capacity has been partially mitigated by power demand destruction and energy conservation.

Tepco said total power consumption in Tokyo and surrounding areas – which accounts for 30% of Japanese electricity demand – fell by 5.9% in March compared with the same month last year, while industrial demand fell by 17.6%. This compares with an overall fall in Japanese power demand of 1.4%.

And energy saving is expected to continue to reduce consumption. The biggest business lobby group, Nippon Keidanren, said about 80% of its members were committed to reducing electricity use by 25% or more during the summer peak-demand season.

“Although the effort by utility companies and others have lead to the reinforcement of power supply capacity, the gap between supply and demand has not been solved,” Keidanren said.

“It is necessary for industries to take voluntary steps to avoid large-scale or rolling blackouts that can significantly affect public lives and business activities.” 

THERMAL POWER SHUTDOWN AND RESTARTS

Plants, unit, and fuel

Capacity (MW)

Notes

TEPCO Kashima 6 (oil)

1,000

Restarted 20 April

TEPCO Hirono 2 (oil)

600

 

TEPCO Hirono 4 (oil)

1,000

 

TEPCO Hitachinaka 1 (coal)

1,000

To restart July

     

Tohoku Electric Sendai 4 (gas)

446

 

Tohoku Electric Shinsendai 1 (oil)

350

Regular maintenance

Tohoku Electric Shinsendai 2 (LNG)

600

 

Tohoku Electric Haramachi 1-2 (coal)

2,000

 

Tohoku Electric Hachinohe 3 (oil)

250

Restarted

Tohoku Electric Noshiro 1-2 (coal)

1,200

Restarted

Tohoku Electric Akita 2-4 (oil)

1,300

Restarted

     

Soma-Kyodo Power Shinchi 1 (coal)

1,000

 

Soma-Kyodo Power Shinchi 2 (coal)

1,000

 
     

Joban Kyodo Nakoso 7 (coal)

250

 

Joban Kyodo Nakoso 8 (coal)

600

Regular maintenance

Joban Kyodo Nakoso 9 (coal, oil)

600

 

Source: Company website, press release, Reuters

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