Kyushu Electric withdraws from power project, cites high LNG prices

17 Jun 2022

Quantum Commodity Intelligence - Kyushu Electric Power Co. said it would withdraw from a plan to develop a liquefied natural gas-fired thermal power plant in Chiba Prefecture, east of Tokyo, reported Japan's Jiji Press.

The company, based in the southwestern Japan city of Fukuoka, said it could not recoup its investment as rising fuel prices have worsened the plant's profitability outlook.

Benchmark JKM (Japan-Korea Marker) LNG prices have rallied sharply over the past year amid the global gas crunch and increased competition from Europe, which is looking to replace Russian gas.

Until the 2021/2022 price surge, the long-term price for LNG in Asia was well below $10/mmBtu and only passed $10/mmBtu in May of 2021, which was viewed as seasonally excessive at the time. 

Price Reporting Agency S&P Global Commodity Insights (Platts) assessed Japan-Korea-Marker (JKM) at $59.672 per mmBtu on 3 March, an oil equivalent of more than $325/b.

In the second quarter of 2022, Asian LNG prices stabilized in the low/mid $20s per mmBtu, but this week soared into the mid-$30s following shortfalls in Russian gas supplies to Europe and the shutdown following an explosion of a major US export terminal – although the Kyushu decision was taken well before this week.

The company said in a statement: "In September 2019, Kyushu Electric Power Co., Inc. and Tokyo Gas Co., Inc. established Chiba-Sodegaura Power Co., Ltd. to conduct a feasibility study on the joint development of a gas-fired thermal power plant in Sodegaura City, Chiba Prefecture.

"However, amidst the turbulent conditions of the global energy situation and after having conducted a comprehensive assessment of the various circumstances surrounding the LNG power plant project, including the fuel and electricity markets, Kyushu Electric Power has decided to discontinue investing resources in the ongoing feasibility study."