Nuclear exit to raise LNG demand

Bloomberg

Japan’s plan to eliminate nuclear power will increase imports of liquefied natural gas by as much as 16 percent, adding demand for ships carrying the fuel, according to Arctic Securities ASA.

On Friday, the government approved a plan to phase out atomic energy by the end of the 2030s, after last year’s earthquake and tsunami triggered the Fukushima disaster. That will add demand for 10 million to 15 million metric tons of LNG a year for a total of 95 million tons by 2020, said Erik Nikolai Stavseth, an Oslo-based analyst at Arctic.

The new policy follows public pressure since the Fukushima accident caused mass evacuations and left areas north of Tokyo uninhabitable for decades. That led Japan, the world’s largest LNG buyer, to boost imports to compensate for idled nuclear reactors. Daily rates for LNG carriers will rise 54 percent to a record $152,000 this year, according to the average estimate of seven analysts surveyed by Bloomberg.

“The decision to move away from nuclear will have a massive impact on the LNG market,” Stavseth said in an emailed report. “The key theme is clearly positive for fossil fuels with LNG expected to be one of the major winners.”

Japan’s 10 regional power utilities imported 5.31 million metric tons of liquefied natural gas in August, a record for that month, the Federation of Electric Power Companies said Friday. The country paid a record $18.07 per million British thermal units in July, compared with $11.21 two years earlier, LNG Japan Corp. data show.

Before Fukushima, Japan got almost 30 percent of its electricity from nuclear power.