By Hiuchi Memi and Suzuki Daisuke
Imports of liquefied natural gas (LNG), which is used as a fuel for power generation, are decreasing. Although there are concerns about a shortage in the winter, when power consumption increases due to a rise in demand for heating, demand for LNG is not increasing at the moment. Demand for LNG in September 2021 was at its lowest level for the month of September in the past five years. Nevertheless, LNG stockpiles could be exhausted in the event of a harsh winter. Japan can only store enough LNG for two weeks’ worth of domestic demand. This low stockpiling capacity is a blind spot in Japan’s energy security.
Thermal energy from LNG is a pillar of Japan’s power supply. As of Oct. 15, 2021, the LNG stockpiles of power companies totaled about 2.3 million tons, 40% higher than the level for the same period in 2020. At a public-private sector meeting on LNG supply and demand on Oct. 21, the Ministry of Economy, Trade and Industry (METI) stated that the LNG stockpile was “at its highest level for the past five years.” A METI official explained that the ministry is taking measures to secure appropriate fuel stockpiles.
LNG imports have decreased due to the increased stockpile. According to the Ministry of Finance’s trade statistics, Japan imported 5.41 tons of LNG in September 2021 (preliminary figures), marking the first decrease in four months and the lowest level for the month of September in the last five years.
One reason why Japan’s LNG stockpiles have increased and imports have decreased is that temperatures in the summer of 2021 were lower than average and demand for air conditioning fell. Another reason is that the resumption of nuclear power plants reduced opportunities to use LNG-generated power.
LNG imports have decreased because stockpiles exist. Although this does not seem to be problematic at first glance, METI has begun considering encouraging major electric power companies to procure fuel for the upcoming winter because “an unexpected increase in demand could cause a power shortage.” Although there is a surplus of LNG at the moment, there is a risk of a sudden supply shortage in the winter. There are several factors involved.
To begin with, LNG vaporizes in its tanks and cannot be stored for long periods of time. Japan’s LNG stockpiles, which utilize private sector tanks, are limited to a total of about 3 million tons for two weeks, for both electricity and gas. The public and private sectors are legally required to stockpile a total of about 200 days worth of petroleum, marking a stark contrast with LNG even taking into consideration the fact that LNG is difficult to store.
European countries have pipelines to complement their stockpile capacities in the region, and the United States has facilities to store gas in depleted gas fields. China, which will overtake Japan in 2021 as the world’s largest importer of LNG, constructed its first pipeline from Russia and is making all-out efforts to build massive storage tanks nationwide. Because Japan is an island nation, it cannot procure gas from other countries through pipelines. (Abridged)