Japan Energy Weekly

Last week saw the first virtual (online-only) hosting of the Japan LNG & Gas Summit. Hosted by DMG with support from Japan’s METI the conference, which was one of the first to re-connect the industry since the COVID-19 outbreak. Below is a summary of some of the conference highlights.

Takeshi Soda

Director, Oil & Gas Division Ministry of Economy, Trade & Industry (METI), Japan

  • “In the face of the enormous impact of COVID-19, it has been proven that LNG is the most reliable energy source for Japan. Even in the midst of COVID disaster, the supply of LNG has not been disrupted.” Soda said this shows the resilience of the LNG network.
  • Japan is working on creating a very liquid LNG market in Asia. “This would ultimately lead to a stable supply in Japan.”
  • While Japan recognizes a rising global commitment to decarbonation and climate change, “we should also support electricity to rural areas” with sustainable and affordable power.
  • CONTEX: In this case “sustainable” is not referencing renewables. This is METI’s way to say that for countries that have ample and cheap coal resources, coal is the sustainable energy source. • “LNG is the best partner for renewable energy.”
  • “We should explore the possibility of using more eco-friendly LNG.” • Japan is working on a new energy policy due in 2021 • “Our hope is for restarts of nuclear power plants.”

Hitoshi Nishizawa

JERA, Executive Officer, Senior Operating Officer, Optimization Dept.

  • We may see some switching from coal to gas in Japan as a result of lower oil / LNG spot prices.
  • LNG and large-scale renewables are “complementary”. JERA aims to be a leader in these two businesses in Asia.
  • In city gas (in Japan), LNG used to be a base to mid power source, but now it is getting to be mid to peak as more renewables come in to the power mix. This means the traditional Asian T&C LNG contract is no longer suitable for the market. “We need creativity in the Term Price.” Given “increased volatility and disparity in the market… transactions should be mutually beneficial for sellers and buyers.”
  • Japan buyers want LNG spot price reflected a bit more in the L-T prices “not for the opportunistic” money saving reason, but to help buyers navigate spikes or dips in demand within Japan.
  • TAKEAWAY: If LNG contracts and pricing are more flexibility, Japan buyers would have more reason to lobby for an expanded use of LNG domestically.
  • Current LNG prices are too low to draw investment for future projects, and “I don’t think it’s healthy”. A low $4 price would be fairer for buyers and sellers.

Ajay Singh

Founder & Director, Global Hydrogen Development, (formerly Special Advisor at JAPEX)

  • Green hydrogen becoming a realistic alternative energy option
  • Companies will be taking decisions on commercial-scale green hydrogen projects within 5 years and realizing them within 8 years.
  • Hydrogen development focused on achieving scale and bringing down the price, but application cases are already available as there are several hydrogen-fueled cars on the market, and there are even wind turbines that can be fueled with hydrogen

Jun Arima

Senior Policy Fellow on Energy & Environment, ERIA & Professor, Graduate School of Public Policy, University of Tokyo

  • "ASEAN Countries will continue to rely on fossil fuels whether we like it or not.”
  • In Asia, the competition for LNG comes from coal, not from renewables, as is the case in Europe. LNG needs more flexible contracts, pricing formula, and innovation in various parts of the LNG chain, including cheaper liquefaction, to make it more cost competitive in Asia (vs coal).
  • What could change the competitive field in Asia is a carbon price. However, that will push up prices in Asian countries and thus is very hard to introduce politically.

Gavin Thompson

Vice Chairman, Energy – Asia Pacific, Wood Mackenzie

  • LNG industry needs to stay competitive to continue to attract investment and that will come from reducing the industry’s carbon footprint. "It’s very important the industry keeps pushing to reduce the carbon intensity of the process. The industry must remain investable. We must remain attractive.”
  • Percentage of gas that gets converted into energy is still low. That should be a focus area for improvement.
  • Blue hydrogen is a bridge to renewable tech.

View full Analysis from Yuri Invest Research

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