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Jera plans to decrease long-term gas purchases

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LNG Industry,

According to Reuters, Japan’s Jera Co. is planning to decrease the amount of gas that it purchases under long-term contracts by 42% by 2030. At present, the company, which is the world’s largest LNG importer, purchases 34.5 million tpy of LNG under contracts that last 10 years or longer. This will fall to approximately 20 million tpy.

Reuters reports that the President of Jera, Yuji Kakimi, said that the company has made this decision in order to prepare for the liberalisation of the Japanese electric market, which has clouded the outlook for Japanese utilities’ LNG purchases. In addition to this, the restart of nuclear power plants, as well as the introduction of renewable energy, may also limit LNG consumption.

In 2018, the company’s long-term contracts will begin to expire, with over 10 million tpy set to conclude in the early 2020s. The company’s president reportedly said that there are not any plans to sign new pacts for the foreseeable future. In order to offset the decline, the President said, the company will sign long-term agreements for approximately 5 million tpy of LNG to stay at the 20 million tpy level.

Kakimi added that the Japanese retail electricity reform, which started in April 2016 and ended regional monopolies, has caused doubt in future power sales. This, he added, has forced utilities to decrease their long-term contracts in order to cover just the essential demands.

According to Reuters, Japanese LNG imports will fall to approximately 62 million t in 2030. This is compared to the 88.5 million t that was imported in 2014. The decline will result from nuclear power plant restarts and increasing use of renewable energy. Jera purchases approximately half of the country’s imports, and is expecting its annual LNG trading volume, or the amount that it consumes plus resale cargoes, to be in the low end of the 30 – 40 million tpy region in 2030. Based on projections of the government of 62 million t of imports, Kakimi reportedly said that Jera would be burning approximately 28 million tpy of LNG by 2030.

Nonetheless, he added, the company’s trading volume would increase to 40 million tpy, if its joint venture (JV) companies’ nuclear power plants do restart operations as projected. At 40 million tpy of trading volumes, long-term contracts would not change at approximately 20 million, with short and medium term contracts and spot-volumes both at 10 million tpy.

Edited from various sources by David Rowlands

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