Qatargas pledges extra LNG supplies for Japan

Qatar pledges to supply 4 million tonnes of extra LNG supplies to Japan in the next 12 months.

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Qatar has pledged to supply an extra 4 million tonnes of liquefied natural gas (LNG) to Japan to help it meet electricity demand after last month's powerful earthquake and tsunami.

Sheikh Khalid bin Khalifa Al Thani, the chief executive of the state-owned LNG producer Qatargas, said the company would increase its LNG shipments to Japan by the equivalent of more than 60 conventional cargoes, providing enough gas to fuel the annual power requirements of about 5 million Japanese households.

"While I was in Japan I could see for myself the urgency [of the need for] help, so we need to move quickly," Sheikh Khalid said. Last week he led a delegation that met senior officials of Japanese gas and electric utilities.

"These additional cargoes of LNG will be supplied to a number of our long-term customers over the next 12 months. The first of these cargoes was discharged while I was still in Japan and I anticipate further sales."

Last month's magnitude-9 quake in Japan and the ensuing tsunami and aftershocks smashed infrastructure and wiped out communities in a wide area of north-east Honshu, the largest Japanese island.

The disasters damaged the Fukushima atomic power plants, sparking the most serious nuclear crisis since the 1986 Chernobyl reactor explosion.

Analysts expect Japan to sharply increase its imports of fuels such as LNG and fuel oil for thermal power generation to compensate for the loss of electricity from its compromised nuclear plants.

The country imports all the oil and gas it consumes but maintains excess thermal power capacity so it can cope with unexpected problems at nuclear plants.

Its fuel of choice for emergency power generation is LNG, which even in the premium Asian market is cheaper than oil and burns more cleanly.

Since the earthquake, the Japanese government has asked industries and residents to do everything possible to conserve electricity.

The Japanese unit of Coca-Cola said it would stop refrigerating its vending machines, of which there are about 250,000, during much of the daytime this summer to cut their electricity consumption by a third.

The rival Japanese beverage maker Suntory is considering voluntary cuts of more than 25 per cent in power consumption by its factories and vending machines.

The Japanese crisis has coincided with the completion of Qatar's five-year programme to expand LNG production capacity.

The Gulf state recently celebrated raising its LNG capacity to 77 million tonnes a year, the fuel equivalent of 1.9 million barrels a day of oil.

But Qatar's LNG expansion has coincided with a largely unforeseen boom in US shale gas production and rapid Australasian gas development, causing a global gas glut. For Japan, that means extra LNG spot cargoes can be bought at reasonable cost, at least for the moment.

Qatargas, one of two LNG production units of Qatar Petroleum, is banking on its rapid response to the crisis in Japan not only to boost revenues as it brings idle capacity online, but also to bolster its reputation as a reliable long-term fuel supplier.

Analysts predicts that in coming years, new Australasian LNG projects will provide strong competition for Qatari supplies in the lucrative Asian market. Some even see Australia overtaking Qatar as the world's leading LNG exporter.

"The ability to swiftly secure these supplies for Japan clearly shows that Qatargas is well placed to help Japan during its moment of need," said Sheikh Khalid.

"The speed at which we have been able to secure additional supplies of LNG is a testament to our flexibility, our commitment to our long-term customers and the good working relationship we have with them."