LNG supplies diverted to Japan

Japan has been forced to introduce rolling blackouts as the country’s energy infrastructure has been badly hit by last week’s earthquake. More worryingly still, a number of regional nuclear power plants have been knocked out by the quake and though the reactors automatically switched to safe mode, the cooling system at the Fukushima power plant has failed and there is a real danger of the plants going into meltdown.

Because of the number of nuclear reactors that have been shut down, Japan is having to carry out planned power cuts. Japan asked South Korea to help it with its gas supply and has predicted that it could take up to a month to restore full supply to the country.

"We will redirect parts of LNG imports from third countries through late March to April to Japan," said a South Korean official at the Knowledge Economy Ministry.

Indonesia is also making available LNG cargos if Japan needs it and Gde Pradnyana, a spokesman at BPMigas, said that the supplies “will come from excess capacity at Bontang plant,” there are still 20 cargoes available for sale from the plant in East Kalimantan province.

Russia has also offered to increase LNG exports to Japan from the Sakhalin-2 project if needed.

World LNG spot trading prices are likely to see a sharp spike in price as a result of Japans’ increased imports. Indeed, in 2007 when Japan shut down its largest nuclear reactor, world LNG spot prices rose globally, and this time around, there are more reactors out of action so the market could see big price hikes.

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