JERA global CEO plays down Australia LNG strike supply impact amid ample inventory

The global CEO of JERA, Japan's largest power generation company, on Sept. 7 played down any supply impact from looming strikes at the Gorgon and Wheatstone LNG facilities in Australia, citing the approaching lower demand shoulder months coupled with ample gas storage in Europe.

"It depends on how long the strike lasts," Yukio Kani said in an interview with S&P Global Commodity Insights on the sidelines of the Gastech conference in Singapore.

Given plentiful gas storage levels in Europe, Kani said: "For the moment, I think the market will stay stable."

But in the event of a "very severe winter" and dwindling gas reserves in Europe, the situation could change, Kani said.

Kani's comments came after Atlantic LNG prices dropped to a one-month low Sept. 6 after news that strikes at Chevron's Gorgon and Wheatstone facilities would be delayed by a day to the morning of Sept. 8.

The Dutch TTF marker's month-ahead October contract dropped by more than 10% on Sept. 6 following news of the delay. Platts, part of S&P Global, assessed it at Eur31.35/MWh, its lowest level since Aug. 8, when news of potential strike filtered through the market.

The almost one-month low for the Dutch TTF month-ahead contract follows significant volatility over the course of the month, with daily price swings of over 10% taking place on eight gas days throughout the month as the market reacted to an increase in supply-side risks despite bearish fundamentals.

The October TTF contract opened the London trading session at Eur31.075/MWh at 0700 GMT Sept. 7 and edged slightly higher to Eur31.850/MWh by 0900 GMT, InterContinental Exchange data showed.

Asia-Pacific LNG prices softened Sept. 7 as market players remained unperturbed by supply uncertainties despite the delay in strikes at the Gorgon and Wheatstone facilities.

Platts JKM for October was assessed at $12.676/MMBtu Sept. 7, down 2% day on day.

Mitigating uncertainties

During the interview, Kani said labor disputes are only a part of various supply risks JERA, which handles close to 40 million mt/year of LNG, needs to mitigate.

"Like labor dispute and things -- you get more uncertainties, especially recent environment," Kani said. "And in terms of LNG, to be very honest with you -- even the largest LNG buyers like us -- are really struggling to try to find the right LNG procurement on time, and that is not easy."

In the face of uncertainty beyond next month's demand, Kani said it was working to bolster its flexibility by strengthening operational and trading capabilities, and diversifying its supply portfolio.

Kani added that JERA's cooperation with EDF Trading in Europe with an access to the Dunkerque LNG terminal in France is lending flexibility to its operations as well as access to European gas pipelines.

On whether further investments in European regasification capacity are on the horizon, Kani said that there are not many options for further capacity additions [regasification slots] in Europe currently, however, having more slots gives JERA the flexibility to divert more cargoes to Europe if economical.