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Nuclear reactor security requirements may boost gas demand in Japan

Japan’s Nuclear Regulation Authority (NRA) has announced it does not plan on extending the deadlines for nuclear reactors to meet the new counterterrorism requirements.

In consequence, nuclear operators Kyushu Electric Power, Kansai Electric Power and Shikoku Electric Power, may have to shut down their units in 2020 if they fail to comply with the requirements in time. If indeed the reactors are led to be shut down, therefore LNG imports could increase significantly to offset the potential reduction of baseload power generation by offline nuclear plants. Historically Japan has increased gas generated electricity consumption in periods of lower nuclear power availability. And the ever low natural gas prices make gas-fired power the most affordable and reliable source more than ever.

The total electricity capacity of Japan is 375 GW, including 228 GW thermal (63 GW of gas-fired capacity). Gas-fired capacity has been growing by 2%/year since 2014 and the country has 208 Mt of LNG regasification capacity. LNG imports have been stable since 2015, around 114 bcm.

More than two-thirds of natural gas is used for power generation. With the closure of nuclear reactors from 2005 to 2007 and since 2011, the consumption of natural gas has increased very rapidly (+5.9%/year, on average) between 2005 and 2012. With the restart of some nuclear power plants, gas consumption decreased by 4% to 126 bcm in 2015 (from 2014 levels). Consumption has picked up recently reaching 127 bcm in 2018, in tandem with gas-fired power generation.

Japan also has 55.5 GW of solar, 3.6 GW of wind, 50 GW of hydroelectricity, and 40 GW of nuclear energy (of which only 8 GW in operation) (end of 2018).