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ECONOMY > Energy

Plans underway to turn Yokohama into a LNG supply base

  • November 7, 2017
  • , p. 72-73
  • JMH Translation

By Hidetsohi Shioda, senior analyst at Circle Cross Corporation

 

Ships fueled by liquefied natural gas (LNG) are widely expected to become the new international standard, driven by the introduction of stringent regulations on the use of sulfur as ship fuel. In Japan, plans are underway to turn the port of Yokohama into an LNG supply base, as low-emission, environment friendly LNG-fueled ships are attracting industry attention.

 

At present, Singapore is known as one of Asia’s leading supply bases of high-sulfur C-fuel (HSC), a fuel popularly used in large vessels. Thanks to its strategic advantage of a location at one of the most important shipping lanes in the world in addition to a well-established port infrastructure and oil refinery facilities, ship fuel prices are relatively low there.

 

To compete with Singapore, Japan aims to turn Yokohama and other key ports into global supply base of LNG so that the volume of LNG trading will expand and the price of the fuel in Japan will drop to an internationally competitive level. This will help increase Japan’s standing as a base for the supply of ship fuel in Asia and may also help Japan inch closer to Singapore in cargo transactions. In 2014, for example, Singapore handled about 560 million tons of cargo, whereas the volume of cargo handled at the Yokohama port in the same year was about 120 million tons.

 

Japan is already well-equipped with fuel-supply infrastructure for LNG ships. It has a number of natural gas-powered thermal power plants. City gas pipelines are also already in place. So it is well-positioned to accommodate large LNG ships throughout the country.

 

In June 2016, the Ministry of Land, Infrastructure and Transport (MLIT) launched a “steering committee for LNG bunkering at the port of Yokohama” to promote the construction of LNG bunkering bases across the country by using Yokohama as a model. In August 2017, Japan and Singapore announced the launch of their joint research on LNG bunkering. Their port authorities as well as Japanese shipping firms (Kawasaki Kisen, Mitsui O.S.K. and NYK Line) set up a working group to discuss supply infrastructure and issues that need to be tackled with an eye on automobile carriers. Roughly one-third of the costs needed to build facilities, such as LNG tanks and pipelines, is expected to be funded by the government.  

 

The MLIT earmarked a “project to promote the construction of LNG bunkering bases” in its budgetary request for fiscal 2018 for the first time. This is expected to spur the construction of LNG fuel bases not only in Yokohama but also at the the port of Nagoya and ports in the Hanshin region. Osaka Gas, Kansai Electric Power Co., Toho Gas and Chubu Electric Power Co. are expected to become LNG suppliers.

 

The robust construction of infrastructure for LNG bunkering across Japan is expected to add to demand for LNG-fueled ships. This is also expected to create business opportunities for domestic shipbuilders and manufacturers of ship motors and engines as well.

 

International competition is already intensifying over the construction of international hubs for LNG bunkering. The task of establishing Yokohama and the Hanshin ports as international hubs for LNG bunkering is not easy. Singapore, for example, finances the construction of LNG-fueled ships through a fund it set up and discounts expenses that foreign LNG-fueled ships pay for port entry and departure. Japan needs to work hard to lower LNG bunkering expenses in various forms through public-private initiatives. (Abridged)

 

 

 

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