Power shortages from the shut-down of the TEPCO Fukashima Daiichi nuke plant likely to be met by LNG

The power shortages resulting from the shut-down of Tokyo Electric Power Company’s (TEPCO) Fukashima Daiichi nuclear power plant due to severe damage from the earthquake are likely to be met by LNG, according to Graeme Bethune, CEO of Australia-based EnergyQuest, an energy advisory firm.

The Fukashima Daiichi plant is large, with 4696 MW capacity. It is also reasonably old, having come into operation in 1971, Bethune notes.

Even if the plant is ultimately brought back into production, this is likely to take many months. In 2007 another TEPCO plant, the 8212 MW Kashiwazaki Kariwa plant had to be shutdown due to earthquake damage and the plant only started to come back into operation in 2009. This generation was effectively replaced by gas-fired generation using LNG, with an impact on the global LNG market through higher spot prices and sales. The same may well happen again.

Replacing a full year of Fukashima Daiichi generation with gas could require additional LNG imports of 5-7 million tonnes, a material addition to overall Japanese imports which were a record 70 million tonnes in 2010. The most likely sources of spot LNG would be Qatar and the Atlantic Basin.

Looking to the longer term, Japan has the third largest level of power generation capacity in the world, a quarter of which is generated by nuclear. Prior to the current disaster there was already concern about expanding nuclear and this is likely to increase. Around 30% of power is generated from gas and this may well increase, with implications for LNG.

Overall, the earthquake on Friday has caused the loss of an estimated 9,700 megawatts (MW) of nuclear and 10,831 MW of thermal power generation, according to a Reuters report.

South Korea, the world’s second-largest liquefied natural gas (LNG) importer, said it will supply LNG to Japan utilities on a swap basis.

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