Japan's JERA hedges growing Middle East risks by seeking more LNG supply
By Yuka Obayashi and Katya Golubkova
TOKYO, March 14 (Reuters) - Japan's biggest liquefied natural gas buyer, JERA, has started talks for potential additional purchases with global suppliers to hedge against Middle East supply worsening further, even as a major LNG exporter said the price spike was short-lived.
Some 20% of global LNG supply is offline as the U.S.-Israeli war on Iran has shut QatarEnergy LNG facilities, disrupting energy supplies from the Middle East. It could take months to return to normal deliveries, Qatari Energy Minister Saad al-Kaabi said last week.
JERA handles about 35 million metric tons of the super-chilled fuel annually, of which around 27 million tons are used domestically, with about 5% of its shipments passing through the Strait of Hormuz, said Global CEO Yukio Kani.
VENTURE GLOBAL SAYS VOLATILITY SHORT-LIVED
While there is no immediate LNG shortage, the company is discussing potential additional procurement with global suppliers with which JERA has long-term contracts, Kani told reporters on the sidelines of the Indo-Pacific Energy Security Ministerial and Business Forum in Tokyo.
"It is still possible that things could settle down within a few weeks. However, it would be far too optimistic to base our planning on that assumption," Kani said.
The average LNG price for April delivery into Northeast Asia was estimated at $19.50 per million British thermal units (mmBtu), down from $22.50/mmBtu in the previous week, which was the highest since mid-January 2023.
If the crisis deepens with the war and the closure of the Strait of Hormuz dragging on, it could become necessary to work with the Japanese government to consider measures such as asking consumers to conserve energy and restarting dormant power stations, including coal-fired plants, said Kani.
The Middle East crisis has brought energy security back on the table, Steven Read, president of Global Coal Sales Group which markets coal produced by U.S. mining company Signal Peak Energy, told Reuters.
"We've already seen customers coming in wanting to talk about options," Read, whose company sells coal to Japan and other buyers, said on the sidelines of the conference. "We had buyers come back saying, hey, we think we might want another cargo."
U.S. LNG developer Venture Global VG.N, the second-largest U.S. LNG exporter and a JERA supplier, believes the "tremendous" market volatility is "very short-term", Chief Executive Mike Sabel told the conference.
"We're tremendously optimistic about the middle- and long-term strength of the market, equity in the market, supply coming online. We expect long-term, very stable liquefaction prices," he said.
Venture Global on Friday decided to proceed with phase 2 of its CP2 LNG project in Louisiana, which Sabel said should start production next year: "It'll have a significant impact on the fuel market prices pretty quickly."
