JERA to handle over 35 mil mt/year LNG, 7 mil mt/year hydrogen and ammonia by FY 2035-36

Japan's JERA expects to handle more than 35 million mt/year of LNG in fiscal year 2035-36 (April-March), as the country's largest power generation company released its first mid-term LNG handling volume outlook in a bid to achieve carbon neutrality by 2050, it said May 16.

"Leveraging on the world's largest-scale LNG offtake capability, we intend to focus on three areas of enhancing the LNG value chain, sales and procurement diversification, and optimize LNG flows at a global level," Yukio Kani, JERA's global CEO and chairman, told a press conference in Tokyo.

Kani said JERA's LNG handling capability has been able to contribute to resource-poor Japan's energy security and provided "a solution," which has been effective to date even after Russia's invasion of Ukraine.

JERA's mid-term LNG handling volume compares with the current volume of nearly 35 million mt in FY 2023-24.

"We also intend to introduce LNG in areas heavily dependent on coal and petroleum mainly in Asia, and are working to promote decarbonization, together with renewable energy," Kani said.

In its first hydrogen and ammonia mid-term outlook, JERA said it aims to handle around 7 million mt/year of hydrogen and ammonia and develop 20 GW of renewable energy capacity by FY 2035-36.

Describing LNG, hydrogen/ammonia and renewables as the three pillars of strategic focus, JERA said it plans to invest a total of Yen 5 trillion ($32.33 billion) by FY 2035-36.

LNG presence

Commenting on its FY 2035-36 handling volume of 35 million mt/year of LNG, Kani said: "Without having a certain scale, we will not be able to maintain our global presence that always brings extremely flexible LNG to Japan."

Due to its scale of 35 million mt/year of LNG handling volume, which allows JERA to buy and allocate a part of supply from long-term contracts, Kani said that the company also supplies LNG to South Korea, China, Taiwan, Thailand, Singapore, India, Bangladesh, France, the UK, Spain, Belgium, Greece and Brazil, in addition to Japan.

Kani, however, declined to elaborate on the portion of long-term contractual LNG supply as it would be changed in a flexible manner in the years ahead.

Asked to comment on the recent G7 Torino ministerial communique on climate, energy and environment that called for "transitioning away from imports of Russian gas as soon as possible," Kani said that JERA would not take any unilateral decision on imports of Russian LNG.

"Speaking of Russian gas, we are buying from Sakhalin 2, which accounts for 7%-8% of our total LNG portfolio," said Kani, adding that the company had already suspended its Russian coal purchase.

"This would not be our unilateral decision because there are small and medium-sized buyers that are heavily dependent on Russian LNG, as well as depends on the Japanese government policy," Kani said.

"This is not something we will decide unilaterally but will keep our steps aligned internationally, considering that Europe is still fully buying Russia's existing LNG," Kani added.

In its communique issued following a meeting over April 29-30, the G7 ministers said: "We recognize that restricting Russian energy revenues is an essential part of our support to Ukraine and are pursuing to end significant dependency on, and to work on transitioning away from imports of Russian gas as soon as possible."

Initial ammonia

On its FY 2035-36 hydrogen and ammonia volume target, Kani said he expects JERA's handling volume of about 7 million mt/year to be "basically ammonia" initially.

However, Kani said JERA is working to provide "various solutions," through cooperation with partners abroad including cracking ammonia to extract hydrogen to be used in part of gas-fired power as a pilot project in Europe, as well as cultivating ammonia demand for bunker fuel in Singapore.

"Just like the LNG value chain, we aim to develop the ammonia value chain by using coal-fired power's large lifting capability as a lever," Kani said. "We then intend to drive decarbonization in society as a whole from opening up the use of our developed ammonia for bunker fuel as well as for small to medium-sized factories."

Commenting on the means of ammonia procurement, Kani said: "A considerable amount will likely be based on long-term contracts" for about 10 to 15 years, considering the need for significant investment required to develop supply chains from scratch.

"Once more and more ammonia is used globally, a similar situation could happen to see a more balanced portfolio of long-term contracts and spot trades like what happened with LNG," Kani said.

JERA is in the middle of carrying out 20% co-firing of ammonia at its 1 GW No. 4 coal-fired unit at the Hekinan thermal power plant in central Japan, following the start of the co-firing test April 1 through June.

At the press conference, Hisahide Okuda, JERA's president and CEO, revealed that its preliminary data showed that nitrogen oxide emissions were confirmed to be equal or lower than sulfur oxide emissions, having been reduced by about 20% compared with those before ammonia conversion in the coal mono-combustion process, and no nitrogen dioxide was found above the detection limit.

JERA plans to use a total of about 40,000 mt ammonia for the Hekinan co-firing test over three deliveries, with a second cargo due to arrive in May and a third cargo in June.

Okuda added that JERA plans to undertake pilot co-firing of hydrogen at gas-fired power plants in the late 2020s and extend it to multiple power plants to begin hydrogen co-firing just after 2030, starting with about 10% conversion.

JERA's target to develop 20 GW of renewable capacity by FY 2035-36 is in line with its April 15 announcement of the establishment of JERA Nex, a dedicated global renewable energy business to develop, own and operate offshore and onshore wind, solar and battery storage assets, based in London.