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Giant Elephant/China's Rise Reality of LNG scramble November 9 17:51

"Wear layers to lower the temperature indoors, and cut the time you use the kotatsu in half

. "

Due to the severe power supply and demand situation in winter, the government will request the public to save electricity for the first time in seven years from December 1st.

LNG (liquefied natural gas) has become an indispensable source of electricity.

However, various factors such as Russia's invasion of Ukraine have overlapped, and now it has become a frustrating battle all over the world.

Reporters followed the scene.

(Dubai Bureau Reporter Kazuhiro Yamao / China Bureau Reporter Akihito Iga / Asia Bureau Reporter Keita Kage / Economic Department Reporter Keisuke Igarashi)

Tragedy in Doha?

A stable supplier for many years...

The first change in Japan's LNG procurement occurred in Qatar in the Middle East.

Doha, the capital of Qatar.

High-rise office buildings will appear as you proceed from the airport along the newly constructed main road.

The construction of unique luxury hotels and condominiums is underway, and you can feel that it is a city bursting with energy.

An hour's drive from this modern city along a single desert road leads to an endless stretch of heavily fenced industrial area.

Security is tight and no one is allowed to approach.

Natural gas produced from the offshore Northfield gas field, which boasts one of the world's largest reserves of natural gas, is processed into LNG here and exported around the world.

Qatar has long been a major source of LNG for Japan, accounting for nearly 20% of Japan's LNG imports in many years.

But now, Qatar's LNG imports to Japan have fallen sharply.

JERA, a thermal power generation company invested by Tokyo Electric Power Company and Chubu Electric Power Company, which has purchased large amounts of LNG for many years.

In December 2021, we did not renew our large sales contract.

The reason for this is believed to be that only long-term contracts of 25 years were permitted, and that it was not possible to predict future demand due to the trend toward decarbonization, and that the strict conditions of a "destination clause" that prevented the free resale of LNG were attached. It is

In a competition for “Qatar pilgrimage”

However, two months later, Russia's invasion of Ukraine changed the global energy landscape.

Russia is the world's second largest producer of natural gas, but after the invasion of Ukraine, Russia narrowed its supply of natural gas to Europe through pipelines, and Europe also sought to break away from its dependence on Russia. is under pressure.

Due to the growing need for stable procurement of LNG, the Agency for Natural Resources and Energy of Japan dispatched a person in charge to Qatar in June this year and has begun discussions on whether to sign a long-term contract again.

However, there is a limit to the amount Qatar can export in the future, and Germany is sending ministers to Qatar.

Where is the LNG procured by Japan going?

Where is Qatar's LNG, which Japan has procured so far, going?

Qatar has not disclosed any details of the exports.

Therefore, I visited a specialized research company "Vortexa" based in Singapore.

This company analyzes LNG distribution trends by collecting signals from AIS and automatic ship identification systems installed on tankers and adding their own information to them.

As a result, it turned out that the largest export destination from Qatar is China.

In the period from January to September this year, shipments to China increased 1.6 times compared to the same period last year.

On the other hand, exports to Japan decreased by 70%, and the market share was lost to China.

Felix Booth, Head of LNG Division,

“At the beginning of this year, two large long-term contracts were signed between China and Qatar, resulting in a significant increase in export volume. However, some European countries have already increased their imports from Qatar, and Japan will be in a difficult situation in the short term.”

Is China an LNG “Explosive Buyer”?

In recent years, China has been actively pursuing long-term contracts with various countries other than Qatar.

In 2021, there will be more than 20 long-term LNG contracts signed by Chinese companies, and the partner countries include Russia, which has a friendly relationship, and the United States, which continues to fight for hegemony.

Why is China increasing LNG imports?

The answer is "decarbonization".

President Xi Jinping has set a goal of reducing carbon dioxide emissions by 2030 and becoming carbon neutral by 2060.

Under the order of the top, we will break away from dependence on coal, which still accounts for nearly 60% of our total energy consumption.

Although China has the means of supplying LNG from pipelines from Russia and other countries, it is actively using LNG to diversify its procurement sources.

Power plants are switching from coal to natural gas.

Although the ratio of natural gas-fired power generation is still about 5%, the consumption of natural gas for power generation has increased 1.6 times in five years, leading to a significant increase in LNG imports.

When I visited a rural area on the outskirts of Beijing, where winter was just around the corner, construction work to install brand new outdoor units on the roofs of houses was being carried out at a rapid pace.

The house used to use coal for heating in the winter, but they are going to switch to an electric heater.

When I talk to the residents of the house...

“There is no place to buy coal under the government policy, so we have no choice but to switch to electricity. I think it is unreasonable because you have to pay for the installation of the coal at your own expense, but there is no point in saying anything to the government.”

This move away from coal has also led to an increase in the use of LNG, and in 2021, China will overtake Japan to become the world's largest importer of LNG.

The amount of imports this year continues to decrease compared to last year due to the "zero corona" policy and the sluggish economy, but if the economy gets back on track to recovery, LNG imports are expected to increase significantly. .

The competition is also in the Americas

Incidents surrounding LNG were also occurring in the Americas.

With the development of shale gas technology, the United States has increased its natural gas production and has now surpassed Russia to become the world's largest natural gas producer.

LNG terminals have been established in various places, and Japan also imports 9.5% (2021 Source: Ministry of Finance trade statistics).

Although it is still a small percentage of the total, the import volume has been increasing in recent years.

However, we are seeing a big change this year.

A large amount of LNG is exported from the United States to Europe.

According to an analysis by Norwegian research firm Rystad Energy, between January and September, US LNG export destinations jumped 2.5 times to Europe.

European countries, which have so far relied on importing natural gas via pipelines from Russia, are switching to procuring LNG from the United States ahead of the bitterly cold winter.

LNG ships from America are now heading to Europe en masse.

That raises my question.

European countries have been heavily dependent on natural gas pipelines from Russia.

How do you receive LNG?

It is said that the construction of an LNG receiving terminal usually takes five to seven years, including the planning stage, and requires a huge investment of about 100 billion yen for large-scale facilities.

One of the solutions was in a northern Dutch port.

The special red vessel is called FSRU (floating LNG storage and regasification unit), and it is a facility that converts LNG transported by tanker back to gas.

It is characterized by being able to be installed in a short period of time and at a low cost compared to building a land base.

In order to start accepting LNG as soon as possible, introduction has started.

The "de-Russianization" progressing in Europe is beginning to have a major impact on the distribution of LNG around the world.

what will you do?

Japan

These global trends have led to a tightening of the supply and demand of LNG, and in Japan, households are being asked to raise electricity prices and save electricity in winter.

Electric power companies have explained that there will be no problems in procuring LNG this winter, but if the temperature drops sharply or problems occur at overseas LNG plants, the supply and demand situation could quickly become tight.

The Japanese government and companies, which rely on imports for energy, are taking various measures to realize stable procurement.

Currently, the Ministry of Economy, Trade and Industry is rushing forward with the creation of a new framework for the mutual interchange of LNG among domestic energy companies.

If a power company runs out of LNG, the government will intervene and receive supplies from other energy companies, thereby avoiding worst-case scenarios such as large-scale blackouts.

Although it is a countermeasure in preparation for an emergency, it can be understood that the sense of crisis within the government is increasing.

Furthermore, from the perspective of economic security, the government plans to designate LNG as one of the "specially important materials" that are essential for people's lives and whose stable supply is particularly necessary.

We will establish a new framework of "Strategic Surplus LNG," in which electric power and gas companies are requested to procure more than they need, and the surplus is distributed when the supply is cut off.

If there is no supply disruption and the surplus is no longer needed, the electric power and gas companies will sell it through overseas markets, etc., and if there is a loss in the transaction, the government will provide a subsidy and pay it back. .

The aim is to compensate for the weak point of LNG, which is almost impossible to stockpile because it evaporates, and to enhance the procurement capabilities of business operators.

Government officials explain that they want to take all possible measures.

Mr. Sakoda, Manager of the Power Supply Office

: “So far, business operators have been doing only within the scope of their business, but it is not enough.

Australia growing in importance

We are also considering medium- to long-term measures to expand supply.

INPEX, a major Japanese resource company, holds the largest stake in a large-scale gas project called Ichthys in northern Australia. I have.

Supplying 70% of that to Japanese companies, it can be said to be a lifeline for Japan's LNG procurement.

INPEX has decided to increase the production capacity of this project by 4% to 9.3 million tons per year by 2024.

We are also considering further expansion of production capacity after that.

We have already secured a site for this purpose on the premises, and we are proceeding with consideration while analyzing medium- to long-term trends in LNG demand.

In particular, Australia is politically stable and has a friendly diplomatic relationship with Japan, so its importance is expected to increase further from the perspective of stable supply.

An opportunity to think about stable LNG procurement

The competition for LNG has intensified due to the Ukraine crisis.

How should Japan deal with it and what lessons should be learned?

Experts point out that we should reaffirm the importance of stable procurement of LNG.

Ken Koyama, Senior Research Fellow, The Institute of Energy Economics

, Japan “Before the invasion of Ukraine, the prospects for liberalization of electric power and the restart of nuclear power plants were unclear among Japanese electric power companies, and it was difficult to predict the future of LNG demand. Under these circumstances, there was a growing belief that increasing long-term contracts for LNG would be risky and difficult.Then the invasion of Ukraine occurred.There was no margin in the production capacity of LNG supplying countries, and even Japan After formulating a medium- to long-term procurement strategy, in addition to securing flexible procurement sources that can be adjusted according to demand, we have concluded long-term contracts for the necessary amount of LNG to some extent. I think I need to go

This winter, it was posted on the power saving menu that the usage time of the kotatsu should be halved.

The global competition for LNG, the source of electricity, will certainly affect our lives.

Securing the energy source in front of you is more important than anything else.

We are also considering how to promote the spread of renewable energy, which is domestically produced energy, and whether or not the government will allow nuclear power plants to operate for more than 60 years. I think it calls for discussion and action.

Dubai bureau reporter

Kazuhiro Yamao Joined Asahikawa Broadcasting in

2011

After working in the social affairs department of Asahikawa Broadcasting, he has

been reporting on the Gulf situation and the Yemeni civil war at the Dubai bureau since 2020.

Chugoku General Bureau Reporter

Akihito Iga

Joined in 2006

Sendai Broadcasting Station Okinawa Broadcasting Station After working in the economic department, etc.,

Chugoku General Bureau since 2020

Reporter

Keita Kage Joined the bureau

in 2005. In

charge of reporting on finance and finance in the economic department, and

since 2020 the Asian bureau .

Economic Department Reporter

Keisuke Igarashi

Joined in 2012

After working at Yokohama Broadcasting Station, Akita Broadcasting Station, and Sapporo Broadcasting Station, Ministry of Economic Affairs

Currently in charge of the energy industry