Japan, the world’s biggest buyer of liquefied natural gas, plans to form a group of like-minded consumers to examine ways of lowering the cost of imports.
Japan’s Trade and Industry Minister Toshimitsu Motegi will announce the plan today at a conference for LNG producing and consuming countries in Tokyo, according to the summary of his speech obtained by Bloomberg News. The International Joint Study Group will be led by the government-affiliated Institute of Energy Economics, Japan, according to the draft.
Japan boosted imports of LNG and other fossil fuels for power generation after the Fukushima disaster in March 2011 forced utilities to shut reactors to carry out safety checks. With the country’s last operating reactor set to be closed in mid-September, Japan is seeking ways to lower the costs, including boosting imports of LNG from North America where a shale gas boom has increased production.
Japan’s nine power utilities will face 3.8 trillion yen ($38 billion) more in combined fuel costs this fiscal year compared with fiscal 2010 because of the shutdowns, the government estimated in April. LNG will account for 1.6 trillion yen of that.
The country paid an average price of $15.11 per million British thermal units for LNG in June, according to data from LNG Japan Corp. That compares with an average price for U.S. natural gas futures of about $3.80 per million Btu.
The U.S. has approved exports of LNG from three projects to countries with which it doesn’t have free trade agreements, including Japan. The Asian nation expects the U.S. to give approvals to two more, allowing exports of about 15 million metric tons a year to Japan after 2017, or about 20 percent of its needs, the draft said.
“There will come a time when suppliers will compete with each other with attractive prices and terms,” as the global LNG supply capacity will increase by 30 percent by 2018, the draft said.
Motegi and India’s Oil Minister Veerappa Moily yesterday agreed to work together to cut costs for importing LNG. The two governments also supported the launch of the LNG group, they said in a joint statement. Motegi is scheduled to give the speech at an opening of the LNG conference in Tokyo today. About 1,000 delegates are expected to attend the conference, the trade and industry ministry said in a Sept. 6 statement.
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