Japan Nuclear Safety Report Seen Having ‘Marginal’ Impact on LNG

A regulatory finding that two of Japan’s nuclear reactors could be safely restarted may not be enough to lower prices for liquefied natural gas because the country’s 46 other units are unlikely to resume this year.

North Asia LNG prices have rallied 54 percent since Japan shut nuclear plants and boosted gas purchases for power generation in the wake of the 2011 Fukushima atomic disaster. Several plants need to be reopened for prices to slump significantly, according to SMBC Nikko Securities Inc., a Tokyo-based brokerage.

Kyushu Electric Power Co.’s reactors at the Sendai facility in southern Japan passed initial safety checks, the Nuclear Regulation Authority said in a draft report, setting in motion the possible return of atomic power. It is the first safety assessment of a Japanese nuclear plant from the regulator set up to replace a predecessor that ignored warnings before the disaster in Fukushima.

“While the restart could have a psychological impact, the effect on the market would be marginal,” Hidetoshi Shioda, a Tokyo-based analyst at SMBC Nikko Securities, said by phone today. “It will change only when Japan restarts more reactors one after another.”

LNG delivered to northeast Asia dropped to $10.65 per million British thermal units in the week ended July 14, down from $10.85 a week earlier, the Energy Intelligence Group said today on the website of its World Gas Intelligence publication. The price jumped to a record $19.70 in February.

Reactor Restart

Kyushu Electric Power Co. may restart two 890-megawatt reactors at its Sendai nuclear plant in southern Japan as early as October, according to Yuji Nishiyama, a Tokyo-based analyst at JPMorgan Securities Japan Co. The NRA’s commissioners approved the draft safety report at a meeting today and agreed to move to the next step of seeking public comment.

“It is just the start of a very long process,” said Leigh Bolton, managing director of Holmwood Consulting Ltd., a Surrey, England-based energy consultant. “The NRA approval and report is only stage 1, as there is still local approval to achieve, and this is still strongly against nuclear. It could still be years before any restart.”

Japan, with the world’s biggest nuclear power generation capacity after the U.S. and France, has been without output from atomic power since September. Kyushu Electric’s Sendai reactors would be the first to resume operations among 19 atomic units applying for the NRA’s safety review.

Kyushu Electric’s LNG purchases from October through December may drop by 500,000 metric tons, equivalent to about 10 cargoes, from a year earlier if the two reactors at the Sendai plant resume operations in October, Junzo Tamamizu, the managing partner of Clavis Energy Partners LLC, a Tokyo-based consulting and advisory firm, said by phone today. Given Japan buys about 100 cargoes a month, the impact on the LNG market is “very limited,” Tamamizu said.

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