Japan’s nuclear reactor restarts expected to push down LNG prices

(Bloomberg; Aug. 13) – Japan’s nuclear reactor restarts will pressure liquefied natural gas prices for years as the nation’s electricity utilities reduce their purchases.Japan turned to LNG for gas-fired power generation after shutting down the country’s reactors after the 2011 Fukushima disaster. Japan purchased a record 89 million metric tons of LNG in the year ended March 31, according to the Ministry of Finance, accounting for 46 percent of Japan’s energy mix in that year compared to 29 percent in 2010.

Restarting reactors would also dent demand for other fossil fuels. If three reactors restarted this year, it would cut fuel oil demand by 80,000 to 100,000 barrels a day, according to Citigroup analysts. “The restarting of nuclear is only one of several seismic shifts now underway in Japan with substantial long-term impacts on global LNG,” the Citigroup analysts, including Anthony Yuen, wrote in a note dated Aug. 12.

Citigroup expects global LNG prices will trade within a range of $6 to $8 per million Btu from now to 2020. In another spoiler for LNG: Supply is increasing from Australia and the United States, further weighing on prices, said Ali Izadi-Najafabadi, an analyst at Bloomberg New Energy Finance. BG Group began shipments from its Queensland Curtis LNG project in Australia late last year, and Cheniere Energy will start operating its LNG terminal at Sabine Pass, La., later this year.