Turbulent 2022: LNG demand in Asia slides as buyers retreat from high prices 

Japan top LNG importer but…

Prior to 2021, Japan had been the world’s top importer of LNG for 51 consecutive years before it was surpassed by China. And for the fifth consecutive year, Japan’s LNG demand fell in 2022, dropping to about 73.6M tonnes of LNG, some 2% lower than 2021, when imports reached 75.3M tonnes, according to Kpler. Still, almost by default, it once again slipped past China to become the world’s largest importer of LNG.

In his analysis of the north Asia and Australasia markets, Japan Gas Association senior advisor and International Gas Union (IGU) regional coordinator Satoshi Yoshida noted Prime Minister Fumio Kishida’s intention announced last year to restart seven nuclear reactors by mid-2023 as a move to reduce the country’s dependence on imported LNG.

“The latest government’s energy plan shows nuclear power will account for 20% of the power mix by 2030, bringing the share back to where it was before the Fukushima disaster,” wrote Mr Yoshida in IGU’s Global Voice for Gas, released in December.

Japan’s Ministry of Economy, Trade and Industry (METI) has proposed to extend the lifespan of nuclear reactors beyond their current 60 years to ensure stable power supplies and also reduce greenhouse gas emissions. This is part of Japan’s Green Transition Policy, which also envisions carbon pricing and e-methane.

At a meeting in Washington DC in January, METI Minister Nishimura and US Energy Secretary Jennifer Granholm discussed co-operation between the US and Japan on nuclear energy, such as developing and constructing next-generation advanced reactors including small modular reactors to maximise the use of existing reactors and build nuclear component and fuel supply-chains, including uranium fuel.

The US and Japan are also committed to “greenhouse gas abatement in fossil energy,” which includes developing carbon capture, storage and utilisation, and strengthening policies for clean hydrogen and ammonia.

S&P Global reported that this shift towards increased nuclear power utilisation comes at a time when many of the country’s long-term SPA LNG contracts are expiring. It reported volumes are set to drop from around 99 mta in 2020 to 65 mta by 2030.

Imports flat in South Korea

Demand from South Korea, the world’s third-largest LNG importer behind Japan and China, was essentially flat in 2022, importing about 46.7M tonnes of LNG.

As one of the world’s largest buyers of LNG, South Korea’s KOGAS maintains a near monopoly over the country’s LNG imports. It holds stakes in some of the world’s largest LNG projects, including Gladstone LNG and Prelude FLNG in Australia, Donggi Senoro LNG in Indonesia, LNG Canada in Canada, RasGas LNG in Qatar, Oman LNG in Oman, Yemen LNG in Yemen, and Coral FLNG in Mozambique. Additionally, it owns 72 LNG storage tanks, with a total capacity of 11.5M kilolitres (kl) of capacity.

It opened the country’s first LNG receiving terminal,  Pyeongtaek LNG Terminal, in 1986. In late January, Pyeongtaek LNG Terminal marked a remarkable safety milestone, hosting its 5,000th vessel to offload at the terminal without an incident. The 37 years of service without a single safety accident represents the longest accident-free record in the country’s public energy sector, according to operator KOGAS. Golar Spirit was the first LNG carrier to call at the terminal in November 1986.

KOGAS president Choi Yeon-hye delivered a commemorative plaque to the captain of Hyundai Greenpia, the 5,000th LNG carrier to call at the terminal.

KOGAS is working with SK Gas, part of South Korean conglomerate SK Group, on the construction of the Korean Energy Terminal in Ulsan. Set to be completed in 2024, the US$850M facility will import and store LNG.

Ground broken for new terminal

Under a plan to increase storage capacity on the country’s southeast coast, POSCO International has broken ground on a new LNG terminal at Gwangyang.

The expansion is part of some US$2.9Bn in investments in the LNG value chain that were announced by POSCO International at an extraordinary general in November 2022, when a merger with POSCO Energy was approved. The merger was completed 1 January 2023.

The South Korean steel, energy, agro and biodegradable materials company is investing in the construction of two 200,000-kl storage tanks, which will be completed in 2025. Once the expansion is finished, POSCO International’s Gwangyang LNG terminal will have a capacity of 1.33M kl.

The capacity of the existing 730,000-kl storage tanks in Gwangyang and Dangjin terminals will be increased over the course of three years. By increasing their capacity, POSCO International expects to secure 4.6M tonnes of LNG transaction volume and storage infrastructure capable of handling 1.81M kl in South Korea by 2026.

The construction of the storage tanks follows South Korea’s increased demand for LNG and cleaner fuels to lessen its dependency on more carbon-intensive coal and other fossil fuels for thermal power generation in a bid to reduce its GHG emissions.

POSCO International is also investing upstream, with plans to triple natural gas production in Australia by 2025 through its subsidiary, Senex Energy, on top of expanding its production base by securing marine exploration rights in Indonesia the next year.

With an eye towards the future, the South Korean conglomerate is putting Krw700Bn (US$532M) into power generation, which includes developing hydrogen co-firing powerplants. It is looking to convert two of the seven LNG power plants in Incheon to hydrogen co-firing units, which is anticipated to give rise to the world’s first gigawatt-level commercial hydrogen co-firing powerplant.

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