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Japan's energy sector Natural Gas, LNG

Japan LNG import costs increase 77.5% from 2011-2013

Japan LNG import costs – we analyze Japan’s official LNG import data

Japan LNG import costs increase 77.5% from 2011-2013

Here we analyze Japan’s liquid natural gas (LNG) costs, which have been driven to record heights – mainly by the very high LNG prices Japan has to pay, and driven even higher by the low YEN exchange rates. If you are interested in precise numerical analysis: you can find detailed graphics and analysis in our Japan-Energy report, based on import data direct from Japan’s Ministry of Finance.

Japan LNG import cost reduction strategies

To reduce Japan’s extremely high payments for energy, Japan’s Government is following several strategies: Japan’s Government seeks to reduce LNG prices by developing new LNG sources, increase coal usage, increase development of renewable energy sources – and work towards restarting nuclear power plants.

Solar projects dominate renewable energy development for now. Our company currently alone is working with a number of clients on a pipeline of about 50 solar projects with a total of approx. 950 MegaWatt – and growing.

If you have questions about Japan’s energy markets – contact us here:

For insights into why Japan’s energy situation has come to where it is today, download the handouts of our talk “Japan’s Energy – Myths vs Reality”, given at the Embassy of Sweden in Tokyo (Alfred Nobel Auditorium) in cooperation with Stockholm School of Economics on June 19.

Liquified gas import costs increased 77.5%

Japan LNG imports: Japan's monthly payments for LNG imports increased 77.5% from 2011 to 2013
Japan’s monthly payments for LNG imports increased 77.5% from 2011 to 2013. Source: https://www.eurotechnology.com/store/j_energy/

Nuclear power has been replaced largely by electricity produced from imported LNG. Japan’s payments for LNG have dramatically increased. We have analyzed Japan’s official data, and found that the increase is mainly due to increased prices and exchange rate, and much less due to increased volumes.

Japan pays higher LNG prices than at the 2008 peak

Japan LNG imports: Japan pays higher LNG prices today than at the peak in September 2008
Japan pays higher LNG prices today than at the peak in September 2008. Source: https://www.eurotechnology.com/store/j_energy/

Japan pays very much higher prices for LNG than Europe or US. The LNG prices Japan pays today are about twice as high as during the slump following the Lehman shock, and are higher than at the peak just before the Lehman bankruptcy in September 2008.

Japan’s liquified gas imports have increased 23%

Japan LNG imports: LNG import volumes currently are about 23% higher than before March 11, 2011
LNG import volumes currently are about 23% higher than before March 11, 2011. Source: https://www.eurotechnology.com/store/j_energy/

Due to intensive electricity saving measures, LNG imports have actually increased far less than would be necessary to replace all switched off nuclear power. Today’s LNG import volumes by weight are only about 23% higher then before the March 11, 2011 crisis, while costs are about 77.5% higher.

This shows that Japan’s extremely high payments for LNG imports are much more caused by high prices than by increased import volumes. Therefore Japan’s Governments and private industry strategies to decrease LNG prices for Japan are the way to go for the short term.

Longterm of course, it is necessary to rebuild Japan’s energy architecture, which has been created in 1952 under orders from McArthur’s military Government, and has been essentially frozen in since 1952. Attempts to liberalize Japan’s energy markets, including electricity, have been largely ineffective.

Another approach to liberalization is currently on its way – as described in our detailed report and analysis of Japan’s energy markets

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Categories
Japan's energy sector Natural Gas, LNG

Japan gas imports: +77.5% from Jan ’11 to Jan ’13 – all-out efforts to reduce energy costs

Japan replaced almost all nuclear energy with liquid natural gas imports

Increased LNG import costs due to declining yen

Japan gas imports: Japan replaced almost all nuclear energy with liquid natural gas imports at very short notice. Japan pays far higher costs for liquid natural gas imports than most other regions in the world (find a detailed explanation why this is so, and how Japan’s LNG import prices are composed, in our J-Energy report). ‘Abenomics’ (Prime Minister Abe’s economy policy package) have increased the costs of imports further due a decline in the value of the yen.

Consequently, Japan makes all out efforts to find the optimal energy mix, in particular searching for domestic sources of energy including renewables, and reducing the cost of imports. More below.

Detailed energy import data, including detailed analysis why Japan’s LNG import costs are so much higher than elsewhere, in our report on Japan’s Energy Landscape.

Japan gas imports: 77.5% cost increase since January 2011

Reason for this increase are increased import quantities, the very high prices Japan is forced to pay for gas imports, and the decrease of the value of the YEN due to ‘Abenomics’. These very high costs drive all-out efforts to secure new sources of natural gas to reduce costs, and also drive the sofar neglected development of renewable energy sources in Japan.

Japan's gas import costs increased by 77.5% from Jan '11 to Jan '13
Japan’s gas import costs increased by 77.5% from Jan ’11 to Jan ’13

Primary energy imports are a very substantial part (about 7% currently) of Japan’s GNP, and have increased by 34% in January 2013 compared to January 2011

However, the figure above shows that current monthly costs of primary energy imports are below the peak just before the Lehman shock. Thus Japan’s primary energy costs are currently very substantial but not without precedent.
Detailed energy import data, including detailed analysis why Japan’s LNG import costs are so much higher than elsewhere, in our report on Japan’s Energy Landscape

Japan's primary energy import costs increased by 34% from Jan '11 to Jan '13
Japan’s primary energy import costs increased by 34% from Jan ’11 to Jan ’13

Descent into crisis of Japan’s electricity operators started in 2007:

Figure above clearly shows that the decent of Japan’s electricity operators started years before the Fukushima nuclear disaster. Therefore we conclude that restarting the nuclear reactors alone will not cure the crisis of Japan’s electricity operators, which for many years have enjoyed a monopoly position, and are now increasingly under attack by competitors including Japan’s very successful gas companies.
We added approx. 50 pages analysis of Japan’s gas sector to our Japan-Energy-Report.

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Categories
Natural Gas, LNG

Japan natural gas import costs sky rocket

Japan switched 30% of total electricity generation from nuclear to LNG

Japan natural gas import replaces all nuclear energy

Japan switched about 30% of electricity capacity from nuclear to mainly natural gas powered thermal power stations within 13 months. We have analyzed Japan’s natural gas imports, which have skyrocketed to almost 2% of Japan’s GDP. Graphics and more details below in this newsletter. Find detailed analysis of Japan’s oil, coal and gas imports in report on Japan’s Electricity and Energy Landscape.

Japan's natural gas imports skyrocket
Japan’s natural gas imports skyrocket

Natural Gas (LPG and LNG) imports skyrocket to 2% of GDP

Since Financial Year 2010 (ended on March 31, 2011, a few days after the March 11 disaster) Japan’s natural gas imports have skyrocketed to almost 2% of GDP – while gas imports were around 0.5% or below of GDP until 2003.

There are two reasons for Japan’s skyrocketing payments for LNG imports

  1. increased import volumes to replace nuclear energy by LNG fired thermal power stations, and
  2. a “Japan premium” on the LNG prices, Japan has to pay above world market prices because of Japan’s special situation, and relatively weak bargaining position.
    Japan is of course under big financial pressure to reduce the payments for LNG imports.

Our report on Japan’s energy sector includes detailed analysis of Japan’s oil, gas and coal imports, and many other data on Japan’s energy and electricity sector, which we continuously update.

Copyright·©2013 ·Eurotechnology Japan KK·All Rights Reserved·

Categories
Electricity Japan's energy sector Natural Gas, LNG Renewable energy

Japan energy dilemma

Japanese law requires the government to have an energy strategy plan in place

Keep nuclear power off – or restart nuclear?

Japan’s current energy strategy plan provides for nuclear power to provide 30% of the electricity, rising to 50% in a few years by building additional nuclear power stations.

However, contrary to the current strategy plan the figure below shows, that Japan essentially switched off all nuclear power over the last year, with 2 exceptions.

A new energy strategy plan is delayed, but could be announced in the next few days. The Cabinet is in a dilemma to decide between the interests of the pro-nuclear business association Keidanren and the pro-nuclear electrical industry and considerable anti-nuclear movements in the general (voting) population.

One major problem is that Japan’s energy architecture and electricity industry is regulated by laws and regulations established in 1952. Essentially, Japan’s energy and electricity architecture has been frozen in 1952, and has not been changed until the Fukushima nuclear accident now forces change. The contribution of “new” renewable energy to Japan’s energy mix is so minute (except for water power), that it would be too small to be seen on the figures below. Our Japan-Energy report explains the major issues facing Japan’s energy architecture and its structure.

Japan’s energy peak is in summer (because energy consumption in Japan for air conditioning in summer is higher than for heating in winter), there were no black-outs, or brown-outs – how did Japan manage successfully despite the sudden unplanned exit from nuclear power? Read below…

How did Japan cope with the sudden exit from nuclear power?

After the Fukushima nuclear disaster Japan effectively stopped nuclear power generation. There are no black-outs - how could Japan manage?
After the Fukushima nuclear disaster Japan effectively stopped nuclear power generation. There are no black-outs – how could Japan manage?

Japan's survived by reducing summer peaks, and by increasing traditional caloric power production
Japan’s survived by reducing summer peaks, and by increasing traditional caloric power production

How did Japan cope with the sudden shut-down of nuclear power?

Japan’s peak power consumption is in summer, all nuclear power (with 2 exceptions) was switched off since this spring, and there were no black-outs, no brown-outs, and no major problems. How did Japan achieve this?

As the lower figure shows, traditional caloric energy production was increased by installing new power plants, and by bringing back old caloric power plants which had already been switched off, and by reducing the summer peak compared to recent years through energy savings. It has been estimated that the additional costs for imported fuel are on the order of US$ 40 billion.

Expect Japan’s new national energy strategy plan to be announced in the next few days.

Japan’s energy architecture is maybe a victim of its pre-Fukushima success: because Japan’s electricity supply was working so well, nobody felt motivated enough to change the existing monopolies, grid, energy mix, or to develop renewable energies. More in our Japan-energy report.

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