Japan is overhauling its energy policy to deal with current realities. It is particularly focusing on LNG prices, long-term supplies, domestic infrastructure development and the promotion of highly efficient natural gas consumption.
There are already 17 new LNG projects planned or underway in Japan to build new terminals and expand storage at existing facilities (See Table). The utilities are also looking seriously at more underground storage in depleted gas fields.
A case study of Japan’s third-largest utility, Chubu Electric Power, shows the measures the company is taking after the shutdown of all units at its Hamaoka Nuclear Power Station.
Here are the 17 LNG expansion projects planned or underway in Japan, including new terminals and more storage at existing facilities
Chubu is trying to make up the lost capacity by increasing output at its LNG-fired power facilities.
“Because of this, while we projected an LNG requirement of around 8.4 million tonnes in our initial plan for this fiscal year, in the first half we procured an additional amount of 3.8MT, and looking towards our measures to respond to supply and demand over winter, we predict that we will require a further amount of 800,000 tonnes.
“We predict that our additional LNG procurement will amount to a total of 4.6MT, bringing our LNG requirement for the fiscal year to about 13MT, or about 50 percent more than our initial plan,” Chubu said.
“The outlook at present is that we believe we will be able to fulfil our requirement for the fiscal year to April 2012 through the procurement of additional LNG from producing countries such as Qatar.
“However, in the area of fuel procurement, it is not enough to simply establish a contract guaranteeing the necessary amount. Procurement is only completed when the procured fuel is safely stored in the company’s tanks,” Chubu said.
“In an average year, about 170 LNG carrier loads are needed for our procurement of LNG. This fiscal year, we expect the figure will be around 20 higher, or a total of 200 ship loads.
“This will mean a very significant increase in the operation of our fuel acceptance facilities such as docks for the tankers and LNG tanks. Given this, we will observe particularly meticulous care in our operations at our LNG acceptance facilities going into 2012,” Chubu stated.
At its LNG facilities, it will be:
- Adjusting inspection periods to ensure that fuel acceptance equipment is able to operate continuously
- Conducting preliminary studies to ensure that LNG carriers are able to dock safely, and implementing optimal operational management through close and detailed communication
- We will work continuously to ensure safe and steady procurement of fuel in order to make possible a stable supply of power
Chubu received its first LNG shipment in 1977 and the Chita LNG import terminal, which it operates jointly with Toho Gas Co., has received more than 3,000 LNG cargoes safely and without incident.
In 2012, almost 50 percent of Chubu’s power capacity will be sourced from LNG compared with the 80 percent sourced from oil in the early 1980s. Now oil accounts for just 4 percent of its capacity, 26 percent comes from coal and the balance is from nuclear.
Chubu also recently started generating electricity from the 595-MW No. 1 unit’s No. 1 shaft at its Joetsu thermal power plant now being operated on a trial basis since November 2011. It was working on LNG imported from Indonesia’s Tangguh plant, Chubu said.
The LNG-fired Joetsu plant is based on the combined cycle power generation system, with its thermal efficiency standing at 58 percent, the highest in Japan.
The introduction of the system is meant to reduce carbon dioxide emissions and contribute to securing stable power supply in the Nagano prefecture area.
The Joetsu plant, if fully operated, is expected to consume about 600,000 of LNG per annum, with its CO2 emissions projected to be cut by 1.6MT per annum.
The Joetsu facility will have LNG storage capacity of 540,000 cubic metres.
Another large project is Chubu Electric Kawagoe power plant and LNG regasification facility with storage of 360,000 cubic metres and planned for 2013.
Other Japanese companies are also pressing ahead with new terminals and storage.
The new Naoetsu LNG import terminal is being built by Inpex with storage of 360,000 cubic metres.
There will also be a new 180,000 cubic metres capacity storage tank at the Ishikari LNG import facility in Hokkaido. Another new terminal is being built at Hachinohe by Nippon Oil with storage capacity of 280,000 cubic metres.
More LNG infrastructure is expected to be budgeted for after Japan’s new Basic Energy Plan is drawn up in 2012. It has three key challenges, called the three Es – energy security, environmental benefits and economic efficiency.
However, in the new situation the three Es have become more difficult to achieve, according to the Japanese think-tank, the Institute for Energy Economics in Japan.
“The energy security challenge has become complicated, and serious as growing geopolitical risks arising from the situations in the Middle East, coupled with expanding energy demand in China and other emerging countries and the intensified global race for resources,” the IEEJ says.
“This is amid the destabilization of the international governance system which is characterized by China’s rise and a relative decline in the influence of the United States.
“The destabilization of the world economy amid European and US sovereign risks has accelerated the confusion and complicated the situation,” the IEEJ adds.
“At present, international negotiations on global warming prevention measures have lost momentum due to changes in political, economic and energy conditions in major countries.
“It has become difficult to maintain the momentum for forming a consensus on a post-Kyoto Protocol framework for the reduction of greenhouse gas emissions. But climate change is an important problem in which global interests are at stake. Its importance is still great from the long-term prospective.
“However, we must observe the tough objective circumstances surrounding Japan and base our energy policy discussions on the circumstances,” the IEEJ stated.
The strategic energy plan of the Japanese government stated even before the March disaster that gas cogeneration is a significant measure to achieve for a low-carbon society, with its advantages of energy savings and low carbon emissions.
After the disaster, gas cogeneration will play a more important role as a decentralized system in terms of supplementing large-scale centralized power plants and electric-load levelling.
Japan also needs to engage in some strategic thinking on the Asian LNG price premium problem if it is to secure more control over its long-term energy costs.
The volume of Japan's future LNG imports at its regasification network may also depend on economic trends and Japan's electricity conservation efforts which have been stepped up since last year.
For the first six months after the earthquake Japan's imports totalled 34.18 million tonnes, a rise of 18 percent from a year earlier. If Japan's LNG imports are to increase at this pace, Japan's additional LNG import requirement could reach 20 million tonnes if no nuclear reactors are allowed to restart in fiscal year 2012, the IEEJ says.
LNG prices have basically continued the upward trend since March, since prices for Japan's long-term import contracts are linked to crude oil. LNG prices for Japan rise with oil, irrespective of LNG supply-demand conditions.
The five underground gas storage sites in Japan are all located in the Niigata prefecture and are even more important assets than before
The share of natural gas in the primary energy supply in Japan has increased year-on-year almost every year since 1990. Since domestic natural gas production is limited, 97 percent of the natural gas used in Japan is imported as LNG.
Domestic gas production is less than 3.5 billion cubic metres a year. About three-quarters of Japan’s imported LNG is from Asia-Pacific countries such as Australia, Indonesia and Malaysia.
About one third of the regasified LNG is used for city-gas, and two-thirds for generating power.
Koji Yoshizaki of Tokyo Gas, Noriaki Sato of the Japan Natural Gas Association, and Hiroshi Fukagawa, Hiromi Sugiyama, Genta Takagi and Takenobu Jono of Inpex Corp. have produced a study on Japan’s storage variables. Some of their interesting findings are as follows:
Since most of the natural gas is imported as LNG, the transmission pipelines have been developed from 28 LNG receiving and regasification terminals and their satellites located close to the high demand areas along the coast.
There are more than 200 city-gas utilities, though the big four utilities represent three-quarters of the total sales volume. A large player like Tokyo Gas regasifies its LNG at three receiving terminals and distributes to more than 10 million customers through its transmission and distribution pipelines.
It also buys domestic gas produced in Niigata prefecture, which is the northern part of the main island, Honshu.
There are five underground gas storages (UGSs) sites in Japan. All of them are located in Niigata prefecture.
Inpex has been operating one of the largest gas fields in Japan, the Minami-Nagaoka gas field, located10 km southwest from Nagaoka city.
It was discovered in 1979 and annual production is at around 1.6 billion cubic metres.
Most of the natural gas produced in the Minami-Nagaoka gas field is directly supplied to the Tokyo area through its pipeline network.
To adjust its calorific value to the specification for the city gas supplied in Tokyo area, 6 mol% of CO2 is removed in the processing facility.
Inpex also has been operating a UGS named “Sekihara” near the Minami-Nagaoka gas field. The Sekihara UGS was originally a gas producing reservoir and then converted to a UGS after depletion.
The Sekihara UGS and the Minami-Nagaoka gas field are connected through a pipeline. Most of the stored gas in the Sekihara UGS has been brought from the Minami-Nagaoka gas field.
The Sekihara UGS is utilized for the purpose of peak-shaving. However, it is difficult to store the same amount of gas at a certain pressure level of the primary depletion period due to the aquifer encroachment to the reservoir.
In the case of the Sekihara UGS, the stored gas volume is 100 million cubic metres less than the initial gas volume at the initial pressure.
Although the supply of natural gas from LNG in Japan is secured with various measures such as diversification of supply sources, the long-term contracts, flexibility clause in the contracts and/or utilization of LNG spot market, the combination of UGS and LNG terminals can make the security level even higher, according to the Japanese experts.
If a UGS is linked with a high-demand area with large pipeline capacity, the gas stored in the UGS can be available when the amount of LNG supplied to the connected area is reduced due to supply problems such as upstream trouble.
Even the security level of a demand area which is not connected to the UGS, becomes higher when the gas stored in the UGS is used for a connected area and that area’s LNG supplies is redirected.
In the case that such LNG cargoes are not able to be redirected, due to the destination clause or inadequate timing, several LNG terminals in Japan can ship LNG around coastal vessels via satellite terminals.
By using the UGS system in conjunction with LNG terminals, the supply can have a more even countrywide distribution, the experts say.
A feasibility study was conducted to evaluate the cost for the case of utilization of UGS combined with LNG terminals and the case of utilization of LNG storage tanks only for emergency stockpiles.
There are several depleted gas fields which are considered as good candidates for UGS in Japan. The size of the depleted gas fields varies.
In the case that the volume of working gas is 2.5 Bcm, a simple gas simulation calculated the volume of cushion gas as 5 Bcm when gas booster compressors are not utilized for the production period.
The number of the LNG tanks with the capacity of 200,000 cubic metres is 22 for the equivalent volume of an emergency stockpile from the UGS network with a working gas volume of 2.5 Bcm.
LNG Journal, Asia-Pacific editor