Fukushima

Japan takes up less real estate than California, and South Korea is smaller than Kentucky, but the two Asian nations are giants in the international liquefied natural gas (LNG) market. Their outsized appetite for LNG, combined with their interests in diversifying their sources of gas supply, could provide a major boost to U.S. and Canadian natural gas producers—only, though, if the price is right. Today, we continue our look at the fast-changing international market for LNG, rising Asia demand, and what these changes mean for gas producers and LNG exporters.

It would be an understatement to say that the worldwide market for liquefied natural gas (LNG) is in flux. LNG production is up and heading higher, oil—and LNG--prices are down sharply from a few months ago, and Japan and other big consumers of LNG are more interested than ever in mitigating price and supply risk. All this comes as Japan, a primary target of prospective U.S. and Canadian LNG export projects, is grappling with the need to restart dozens of idled nuclear units so it can reduce the oil and LNG imports that have hurt its trade balance since the Fukushima disaster nearly four years ago. Today we consider recent developments and how they may affect Japan and its potential LNG suppliers on the North America side of the Pacific.

The total shutdown of Japan’s nuclear power industry in the wake of the March 2011 Fukushima disaster caused a more than 20% increase in liquefied natural gas imports. In 2015, the first two of the 48 Japanese nuclear units that were taken offline post-Fukushima are expected to be restarted, but it will take several years for most of the rest to come back online—and it’s likely that many nuclear units will never return to service. How much did Fukushima change Japan’s electricity sector, and how will that nation’s fledgling nuclear reboot affect LNG imports, not just from current suppliers like Australia, Qatar and Malaysia but new and prospective suppliers in the US and Canada? Today we begin a look at the electric industry in Japan, the future of nuclear power and LNG use there, and the Japanese-led effort to change how LNG is priced.