Japan's JERA buys on LNG spot market to ensure winter power supply

FILE PHOTO: General view shows JERA's Hekinan thermal power station in Hekinan, central Japan October 18, 2021. REUTERS/Yuka Obayashi

TOKYO (Reuters) - Japan's biggest power generator JERA has procured 2 million tonnes of liquefied natural gas (LNG) on the spot market to be delivered between November and March to ensure adequate power supply during the peak winter demand season, a company official said on Wednesday.

JERA, one of the world's largest LNG buyers, will make an additional purchase if necessary, company executive Takashi Noguchi told reporters.

Japan's government has warned that electricity supplies this winter could be at their tightest in a decade amid a surge in global energy prices that is hampering economic recovery from the pandemic.

JERA, which imports about 32 million tonnes of LNG a year, bought 3 million tonnes of LNG on the spot market last winter when Japanese LNG users competed with Chinese and South Korean buyers for cargoes in a tight market as freezing conditions hit the region for several weeks.

To ensure fuel supply, JERA plans to keep its LNG inventory level at 1.7 million tonnes during December and February, 0.2 million tonnes higher than usual, Noguchi said.

JERA, a thermal power and fuel joint venture between Tokyo Electric Power Company Holdings and Chubu Electric Power, has also signed a cancellation option agreement with its JERA Global Markets trading unit, enabling it to cancel supply within a month of delivery instead of the two months it would normally take.

The company is committed to avoiding fuel constraints this winter and will make every effort to ensure a stable supply of energy, Noguchi added.

(Reporting by Yuka Obayashi; Editing by David Goodman)

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