North Asia ramps up stockpiling for winter to cut costly spot LNG buys (updated)

Korea Electric Power

03/11/2022 07:53

* 
      Key Asian LNG importers stockpile and diversify supply
sources
    

        * 
      South Korea and Japan also resort to demand management
measures 
    

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      Risks from supply disruptions, cold snap remain - analysts
    

  
 (Adds Asia LNG price chart, bylines)
    By Emily Chow and Yuka Obayashi
       SINGAPORE, Nov 3 (Reuters) - Key North Asian economies
are stockpiling fuel, diversifying sources and conserving power
to ensure adequate supplies for winter, as an unprecedented
global energy crisis makes spot liquefied natural gas (LNG)
purchases costly.
    Major LNG importers - Japan, South Korea and China - have
been grappling with soaring prices of the super-chilled fuel
after Russia cut supplies to Europe following its invasion of
Ukraine, leading to a surge in Asian spot prices as well.
    A plunge in the value of local currencies from Japanese yen
to Chinese yuan against the U.S. dollar has also increased the
burden of costly energy imports on these economies.
    Led by crude oil, LNG and coal, Japan's September imports
jumped 45.9% year-on-year to hit a record high in terms of value
as a weak yen aggravated already high fuel import costs.
    "Our basic approach is to have relatively high inventories
during this winter ... while adjusting the delivery schedule of
LNG tankers to reflect demand," the CFO of Tokyo Gas, Japan's
biggest city gas supplier, said last Thursday. 
    "If LNG from Russia is disrupted, we will need to negotiate
to take alternatives from other suppliers," Hirofumi Sato added.
    LNG inventories at Japan's city gas providers, as well as
major utilities, were above a five-year average, according to
their most recent data. 
    South Korea too is stockpiling LNG and began buying spot
cargoes in September, a month earlier than usual, an industry
ministry official said.
    But analysts warned persistent supply risks or an unexpected
cold snap could negate the effects of such well-planned measures
as Japan, South Korea and Beijing are, according to Refinitiv
forecasts, likely to see a milder winter. 
    REDUCE AND DIVERSIFY
    South Korea and Japan have also resorted to demand
management measures, including asking consumers to turn off
unnecessary lighting and keep heating temperatures lower. South
Korea is campaigning to cut energy usage by 10% this winter. 
    Japan utilities plan to reboot aged thermal plants and
restart at least one more nuclear reactor earlier than planned. 
    Meanwhile, China is expected to steer clear of spot LNG this
winter amid higher prices and low demand growth due to COVID-19
curbs. It is pumping more gas domestically and receiving more
from Russia both by pipeline and LNG shipments.
    Global gas prices rose to historic levels this year on
Russia's supply cuts, as Europe imported record amounts of LNG
and drew in volumes from Asia. 
    This pushed Asian spot LNG prices  LNG-AS  to record levels,
though they have since eased amid solid inventory levels.  LNG/ 
    But supply risks persist.
    "Much of the Asian market's confidence is because supplies
have been secured ... Any disruptions to those will re-inject
bullish (price) sentiment," said Rystad Energy in a note.
    "Supply side risks remain with Freeport LNG still undergoing
maintenance in the U.S. and Nigeria LNG under force majeure."
    A prolonged force majeure by Malaysia LNG, majority owned by
Petronas, would also heighten supply risks. 
    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
North Asian temperatures forecast    https://tmsnrt.rs/3WmnnFz
FACTBOX-North Asia gears up for peak winter energy demand season
    urn:newsml:reuters.com:*:nL4N31Y2VB
Asia LNG prices    https://tmsnrt.rs/3Ujiwmz
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Emily Chow in Singapore, Yuka Obayashi in Tokyo
and Joyce Lee in Seoul; Editing by Florence Tan and Himani
Sarkar)
 ((emily.chow@thomsonreuters.com; Reuters Messaging:
emily.chow.thomsonreuters.com@reuters.net))