METI official: Japan could increase LNG purchases for emergency reserves to almost 1 million T per year.

An official from the industry ministry stated that Japan may increase its purchases of LNG for emergency purposes to at least twelve cargoes per year, up from the current three, in order to protect against supply shocks.

The plan to boost reserves involves the second largest LNG buyer in the world, China. It will increase its purchases from 0.21 million tonnes per year to at least 0,84 million tonnes.

In order to increase energy security and boost domestic demand, Japan trades cargoes it does not want at home when demand is low.

JERA, Japan's largest power generator, purchased one LNG cargo each for winter, for a total of 3 for the year, in order to supplement a "Strategic Buffer LNG" (SBL) managed by the Ministry of Economy, Trade and Industry.

Yuya Hasegawa is the director of the energy resources division of the Ministry. She said that JERA would continue to buy 70,000 metric tonnes of cargos each month, from December through February.

Hasegawa stated that JERA would continue to handle cargoes to the reserve. JERA is also Japan's largest LNG buyer.

Japanese power utilities are calling for an increased SBL. This would allow JERA to supply a cargo in urgent need to a utility. It is a way to protect against sudden supply shortages caused by, for example, military conflicts and nuclear reactor shutdowns.

Japan's customs department reported that Australia was the country's largest LNG supplier, by far. However, the Middle East (including Qatar and Oman) supplied 14% of Japan's August LNG needs, while Russia provided another 10%.

The International Energy Agency reports that Japan does not have underground gas storage, but it has LNG storage capacities of 12 billion cubic metres, or a little more than a month's consumption, in its LNG receiving terminals.

METI last month proposed financial assistance to companies for securing storage tanks in the home and abroad. This scheme is separate from SBL, but also aims at improving energy security.

In Japan, LNG is a third of all power generation. It will continue to be a transitional energy source for the foreseeable future. Recently, Japanese companies have expanded LNG swap agreements in an effort to increase flexibility. (Reporting and editing by Clarence Fernandez; Additional reporting by Yuka obayashi, Editing by Katya golubkova)

(source: Reuters)