Japanese LNG imports declined once more in February, by 0.94 Mt (11%) y/y to 7.35 Mt according to customs data. Given low imports in February, we estimate a reasonably healthy LNG storage draw of 0.32 Mt across that month. Indications of another light month for Japanese LNG imports in March, down 13% y/y, puts end of March total LNG and gas storage carry-out at just 0.2 Mt higher y/y. With storage returning to more normal levels, higher scheduled maintenance of operating nuclear plants over the summer does suggest some more room for gas-fired generation. Together, this should provide better support for LNG imports in the coming quarters. Across Q2 and Q3 19, we forecast Japanese storage imports will be modestly higher by 0.61 Mt y/y.
Given the 18% y/y fall in HDDs in February, we expect that res-com demand will come in around 13% lower y/y (and 10% lower than the four-year average) at 0.98 Mt. For March current HDDs are at 8.08 (essentially flat y/y with 2018 March HDDs at 8.15). Winter 2018/19 has been very mild, with HDDs 15% lower y/y over November–February, allowing stocks to sit 1.1 Mt higher y/y at 4.3 Mt by end-February. Current Kpler ship tracking data suggests imports for March to be around 6.9 Mt, down 13% y/y, after a heavy bout of restocking last year. Our current forecast for March total demand sits at 7.2 Mt (-1.6% y/y), which leaves our balances showing an end-March carry at 4.3 Mt, up y/y by 0.2 Mt, with the y/y surplus pared by the big stockbuild in March 2018.
|Fig 1: HDDs, power and rescom demand y/y percentage change, %||Fig 2: Japanese nuclear generation, Twh|
Note: Striped bars are Energy Aspects estimates
|Source: METI, HJKS, Energy Aspects|
Since the 7 December restart of the 0.97 GW Takahama Unit 3, all of Japan’s 9.1 GW of restarted nuclear capacity have been operational and is expected to stay that way until 10 April, when the 1.18 GW Ohi Unit 3 goes offline for maintenance. The last available METI data point for November 2018 shows nuclear generation at 6.3 TWh (+148% y/y), but with Takahama 3 fully back online, we expect that generation has been closer to 6.8 TWh in the longer months.
Additionally, renewable generation has continued its sequential y/y gains—up by 18% y/y at 5.8 TWh in November. We expect total renewable generation to remain around this level until April, when solar capacity additions should lift generation to around 7 TWh. However, both these upsides could be largely offset by lower hydro generation, which was 37% lower y/y at 4.4 TWh in November. In December, precipitation levels were flat y/y, but were 22% below the four-year average in January and February, so we do not expect generation levels to recover soon.
Given the mild weather, we have pegged power sector gas demand at an average of 5.07 Mt across December–February, down by a total of 1.68 Mt across the period (10%) y/y. Total electricity generation as reported by Octonet averaged 80.4 TWh in February (-4.4% y/y), down with the warmer weather. Given the current HDD forecast for March is largely flat y/y, we expect March power sector demand to come in almost flat y/y at 4.5 Mt (-0.3% y/y).
A district court last week denied an injunction request to immediately halt operations at Shikoku Electric Power’s 0.9 GW Ikata Unit 3 nuclear reactor. The company will be allowed to continue operating the reactor until a decision is made in the current case that seeks to permanently shutter the reactor. The reactor has been the subject of ongoing legal wrangling since it was restarted in October 2018, after a Japanese high court overturned a previous injunction. Shikoku has decided to decommission the other two nuclear units at Ikata, its only nuclear power plant. Hokkaido Electric power restarted its new 0.6 GW Ishikariwan-Shinko Unit 1 CCGT after an unexpected technical problem. The plant began commercial operations on 27 February and suffered a shutdown from 8 March to 13 March. The company is currently building a fourth storage tank at the Ishikari LNG terminal, with completion scheduled for October 2020. There are plans to develop two similar-sized CCGTs at the site by 2030.
We note that we have improved and restated our balances with the inclusion of several data sets from the Japanese Ministry for Economy and Trade (METI). Although delayed, the sources offer detailed monthly data on power generation and city gas consumption and production. We will continue to test the reliability of this data, but we feel the sectoral breakdown is useful for improving the understanding of market trends.