As Japan struggled Monday to prevent a catastrophe at nuclear reactors crippled by the earthquake and tsunami that struck the country last week, both Russia and Qatar said they were willing and able to step in with supplies of liquefied natural gas (LNG) to take up the slack for lost power generating capacity.
However, as the tragedy continued to unfold, it was unclear what power demand would be in either the near or long term and what infrastructure would be available to generate and carry electricity.
Analysts at Barclays Capital turned to the 2007 earthquake-related outage of Japan's Kashiwazaki-Kariwa nuclear plant and from that tried to extrapolate what the shut in of the three nuclear plants crippled by the catastrophe would mean today. The three afflicted plants represent about 12,000 MW of generating capacity, according to Barclays.
If the replacement power scenario worked the same as during the 2007 plant outage, replacement of the three plants' output would result in incremental demand of 7.8 kilotons of coal, 143,000 b/d of fuel oil, 67,000 b/d of crude oil and 0.8 Bcf/d of LNG, Barclays said.
At least where the LNG is concerned, both Russia and Qatar are willing to chip in. Russian Prime Minister Igor Sechin said his country could supply Japan with 200,000 metric tons of LNG and about 6,000 MW of power, according to Reuters.
Additionally, LNG giant Qatar's Qatargas and Rasgas could step in with supplies. "Qatargas stands ready to provide all the support to its long-term partners and foundation customers in Japan to meet any increased requirements for LNG at this time," the company said in a statement, as reported by Reuters.
The United States has been a long-time supplier of LNG to Japan via the Kenai LNG export terminal in Alaska. However, last month ConocoPhillips, operator of the terminal, said the facility would be mothballed due to an inability to secure contracts for the plant's output (see Daily GPI, Feb. 11). Since it opened in 1969, all of the plant's cargoes have gone to Japan except for one. The plant's last contract was due to end this month. At its peak the Kenai terminal was exporting 63-68 Bcf/year with more than 30 tanker calls per year. However last year exports were about 30 Bcf.
ConocoPhillips did not immediately respond to an inquiry about the Kenai facility's future in light of developments in Japan.
Japan had been consuming about 10 Bcf/d of natural gas and that consumption was growing at about 2.5% annually, according to Tudor, Pickering, Holt & Co. Securities Inc. (TPH). The country was getting about 75% of its gas from Asia with the rest coming from the Middle East to serve first its power sector and then the industrial sector.
In 2009 Japan ranked as the third biggest dry gas importer in the world, behind the United State and Germany, according to the U.S. Energy Information Administration. The country's dry gas imports that year were 3,281 Bcf, the vast majority in the form of LNG.
Japan has numerous gas-fueled power plants that run on LNG. According to Barclays' count, eight of those LNG-fueled plants are in or near the region affected by the earthquake and/or tsunami. Besides these eight, there are eight other thermal power plants, running on a combination of crude, fuel oil, LNG, natural gas liquids, liquid propane or coal, in the impacted region, according to Barclays, not to mention the nuclear plants.
"The extent of [the thermal plants'] damage is unclear at this time," Barclays said. "In the short term, the shut-down of thermal generation facilities is likely to result in a drop of demand for fuels; however, gains from nuclear outages are likely to be longer lasting."
If inspections and upgrades keep the 12 GW of Japan's 48 GW of nuclear capacity offline for a significant period, it would require an incremental 6% of Japan's annual power production to come from thermal sources, according to TPH.
"Japan's thermal fleet is roughly 40% gas-fired, 40% coal and 20% oil (on a BTU consumption basis). If the entire estimated 12 GW loss of generation output was made up by LNG, demand increases 1.1 Bcf/d. If by coal, 17 million metric tons, and if by oil 200,000 b/d. In 2007 the bias appeared to be towards increased oil consumption as [there was] lots of underutilized oil-fired generation. Expect incremental emphasis this time around on cleaner-burning natural gas if possible.
"Note this worst case is not too far fetched," TPH said as the 2007 quake left the Kashiwazaki-Kariwa facility entirely offline for more than two years. Only four of seven units have returned to service to date. "The current pumping of seawater and boric acid into the Fukushima reactors means those reactors [are] likely permanently out of service," TPH said in a note Monday.
Because residential, commercial and industrial facilities have all been devastated, it's hard to assess what power demand will be going forward, particularly in the near term, Barclays said. Additionally, power transmission lines also have obviously been affected.
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