Japan's JERA shuts 6 GW gas-fired capacity on fuel restrictions

JERA, Japan's largest power generation company, has shut at least 5.95 GW gas-fired capacity over 19 units March 27 due to fuel restrictions, the company said in filings to the Hatsuden Joho Kokai System, in a rare massive-scale fuel restrictions taking place at multiple thermal power plants in Tokyo Bay as the country's LNG inventory falls to the lowest level since January 2021.

Despite fuel restrictions extending into March 28-29, Japanese refiner, gas utility and LNG supplier have not received emergency requests for supplying low sulfur fuel oil, LNG cargoes to JERA given expectations of easing fuel shortages after the arrivals of LNG carriers in coming days, according to sources familiar with the matter.

In a total of 54 filings in the HJKS, JERA attributed its fuel-restrictions led shutdowns of gas-fired power plants due to fuel restrictions over March 27-29 as a result of weather and oceanic phenomenon. The company is cutting its output because of fuel restrictions at the 1 GW No. 3 Higashi Ohgishima unit by 699 MW until March 29, it said in another filing to the HJKS on March 27.

JERA is scheduled to shut a combined 4.98 GW of gas-fired capacity on March 28 and 6.22 GW of gas-fired capacity at its thermal power plants on March 29 due to fuel restrictions, the company said in updated filings as of 11:25 am local time (0235 GMT) March 27.

"A series of fuel restriction-led shutdowns of gas-fired power plants appeared to be a result of such multiple factors as depleted LNG stocks following a boost in power demand as a result of a drop in temperatures in March, coupled with shutdowns of coal-fired power plants," said Takayuki Nogami, chief economist at Japan Organization for Metals and Energy Security, or JOGMEC.

"This incident also exposes [the] vulnerability in [Japan's] LNG supply security," said Nogami, adding that additional steps might be necessary to bolster the country's LNG supply security including from enhancing storage capacity and timely procurements.

The move follows weeks of depleting LNG inventories for power generation as a result of experiencing a drop in temperatures with fewer arrivals of LNG carriers in recent weeks as Japan is nearing the end of winter power demand season.

Japanese power utilities have been securing LNG at levels comfortably above their needs for the demand seasons following the implementation of the Ministry of Economy, Trade and Industry's fuel guidelines that call for avoiding the implementations of fuels restrictions during the demand season after experiencing the severe tightened power supply and demand balance in January 2021.

The Ministry of Economy, Trade and Industry demanded that JERA explain the reason behind this massive fuel restriction at its gas-fired power plants in the next few days, a METI official told S&P Global Commodity Insights.

The move by JERA came as Japan's LNG stocks held by power utilities dropped 5% to 1.52 million mt on March 24, the lowest level since end-January 2021, when it stood at 1.49 million mt.