Energy-hungry Japan waits as U.S. debates exports

NIIGATA PREFECTURE, Japan -- Engineers at the Nihonkai liquefied natural gas import terminal on the banks of the Sea of Japan are quietly retooling a maze of 1970s-vintage pipelines and storage tanks to handle shipments of much-needed shale gas from Louisiana.

But nobody at this massive terminal in northwestern Japan dares predict how long the country will have a robust appetite for imported LNG as calls grow louder for restarting Japan's 48 reactors, which supplied almost a third of the nation's power.

Susumu Yashima, president of Nihonkai LNG Company Ltd., said gas demand skyrocketed when Japan shut down its nuclear power after a magnitude-9 earthquake and tsunami crippled three reactors at the Fukushima Daiichi plant in 2011.

"Compared to before the earthquake, demand [for gas] has increased 60 to 70 percent," Yashima said through an interpreter.

Gas demand also jumped after floods interrupted hydropower projects and gas-fired power plants in northwestern Japan, Yashima said.

Seventy-nine shipments -- 4.9 million tons of LNG -- have arrived at the terminal this year, up from 3.39 million tons of LNG in 58 shipments in 2011, the year the earthquake and tsunami hit Japan.

LNG that arrives here in tankers is pumped into eight massive tanks and later gasified as it's passed through tubes sprinkled with seawater. Gas is then sent to Tohoku Electric Power Co., which generates electricity in Japan's hilly, northwest region, which includes Niigata Prefecture.

The prefecture is known for its rice and sake and for being one of the snowiest places in the world, with one of its cities, Tokamachi, getting almost 460 inches annually. It's also home to the world's largest nuclear reactor, the now-idle Kashiwazaki-Kariwa plant.

With its reactors shuttered, Japan is positioned to become a prime consumer of U.S. shale gas. More than 20 North American companies are awaiting U.S. government approval to send the LNG abroad to terminals like Nihonkai's here.

The Nihonkai terminal is partially owned by Tohoku Electric Power, which signed a 20-year agreement this year to take LNG from the Cameron LNG terminal in Louisiana, home state of Senate Energy and Natural Resources Chairwoman Mary Landrieu (D), who's touted her efforts to promote the export of U.S. gas in her re-election fight.

Louisiana LNG, engineers say, could arrive here as early as 2018.

To prepare, engineers are upgrading pumps at the terminal to take higher-pressure, methane-rich U.S. gas, Yashima said.

The LNG from the United States, he added, would join vessels arriving now from Malaysia, Australia, Qatar, Russia and Indonesia. Nihonkai is also entering contracts, he said, with new partners like Equatorial Guinea, Peru and Nigeria.

"Those are countries that we hadn't had a relationship with before," he said.

'Little by little'

Yashima's comments shine a bright light on what LNG export advocates are calling a "closing window of opportunity" for U.S. exports.

U.S. gas prices are hovering around $4 per million British thermal units, compared with $15 per MMBtu in Japan.

Some say opportunity for the U.S. to fetch high prices could wane if Japan decides to restart its shuttered reactors.

"Well, I think it's assumed and predicted that if reactors are restarted, the percentage of LNG will be less," Yashima said, adding that the move would also lower prices and reduce the use of thermal plants. "I think it'll be necessary to have a variety of power sources, not only nuclear but hydropower."

In March, a top Japanese government official, speaking at an event during IHS CERAWeek in Houston, said Japan would likely restart a third of its reactors -- 17 units -- in the next two years to drive down the high cost of LNG and other imports.

Takayuki Sumita, a top-ranking official with Japan's Ministry of Economy, Trade and Industry (METI), said Japan is also actively encouraging its natural-gas-fired power plant operators, dependent on LNG, to lock in deals for forthcoming future supplies of North American shale-based LNG (EnergyWire, March 6).

Japan's government is also trying to organize LNG customers to shore up the country's bargaining power.

Since 2012, METI has been sponsoring an annual LNG Producer-Consumer Conference in Tokyo as a forum for Japanese customers to begin negotiating lowering its gas bills. The government is also eager to see a flexible, fluid trading system for LNG emerge in the Asia-Pacific region, with Tokyo serving as a possible hub for LNG trades.

For now, Yashima acknowledged U.S. shale gas offers an attractive option for the archipelago nation to drive down its sky-high energy costs and diversify its gas supply.

LNG that Japan is importing from the Middle East and Australia is costly, but U.S. shale could help shave those prices and allow Japan to diversify. But he acknowledged that could change. "It's quite cheap, but there's the possibility that they will increase the price of gas, it's not clear," Yashima said.

The Cameron project in Louisiana has been at the head of the pack when it comes to U.S. federal export approvals -- a thorny subject on the other side of the world in Washington, D.C., where a growing chorus of lawmakers is calling for agencies to pick up the pace.

Firms that own the export facility in Cameron Parish, La., indicated the plan to ship LNG to Japan was underway after securing $7.5 billion in loans.

The Cameron plant's largest share is owned by Sempra Energy, while Mitsui & Co., GDF Suez SA, and a joint venture of NYK Line and Mitsubishi Corp. also own portions of the project (Greenwire, July 31).

The Federal Energy Regulatory Commission, which oversees environmental reviews of LNG export terminals, approved the project this summer. But Cameron's owners still need a green light from the Energy Department to export gas to Japan, which does not have a free-trade agreement with the United States.

Nihonkai President Yashima, who oversaw fuels at Tohoku Electric before joining Nihonkai, said he was aware of the debates overseas but said he wasn't familiar with how DOE operates.

Nonetheless, he said, it's clear DOE is trying to pick up the pace.

"Before it was the DOE didn't give us too many approvals to export to no members [without a free-trade agreement]," Yashima said. "Now it's been little by little."


Twitter: @HMNorthey | Email:

Like what you see?

We thought you might.

Start a free trial now.

Get access to our comprehensive, daily coverage of energy and environmental politics and policy.



Latest Selected Headlines

More headlinesMore headlines

More headlinesMore headlines

More headlinesMore headlines

More headlinesMore headlines