LNG market lacks capacity to bridge supply gap from Hormuz disruptions: JERA Global CEO

The global LNG market lacks the capacity to "bridge the gap" for any supply losses arising from disruptions in the Strait of Hormuz, according to Yukio Kani, global CEO and chairman of JERA, Japan's largest power generation company.

"There is no capacity to bridge the gap, that kind of capacity," Kani told Platts, part of S&P Global Energy, on March 14. He noted that LNG coming from the Strait of Hormuz accounts for nearly one-fourth of the global supplies.

"So, in short, we really need to be very innovative and collaborative; we need to collaborate inside Japan and outside Japan," he said on the sidelines of the inaugural Indo-Pacific Energy Security Ministerial and Business Forum in Tokyo.

Kani said they are making sure to procure LNG supplies amid expectations of a prolonged conflict in the Middle East. "It will not end within a couple of weeks, [but] rather at least a couple of months."

Asked about the impact on the LNG market, Kani said, "The impact will be relatively large scale, not only in the LNG market, but other oil market as well. So, we take it very seriously."

Prices surge

The Strait of Hormuz is a vital chokepoint through which about 20% of the world's oil and LNG supply transits daily.

Platts assessed JKM -- the benchmark price reflecting LNG delivered to Northeast Asia -- for April at $18.922/MMBtu on March 13, compared with $10.697/MMBtu Feb. 27, prior to the Gulf conflict.

LNG prices rose as high as $25.393/MMBtu on March 3, the highest level since 2022, as the ongoing Middle East conflict affected LNG supply flows.

The price surge came as QatarEnergy on March 4 declared force majeure on its LNG supplies to affected buyers, having halted LNG production on March 2 due to military attacks on its operating facilities in Ras Laffan Industrial City and Mesaieed Industrial City.

JERA, a 50-50 joint venture established in 2015 between TEPCO Fuel & Power and Chubu Electric, currently purchases 700,000 metric tons/year of LNG from the Qatargas 3 project under a contract set to expire in 2028.

JERA handled about 35 million mt/year of LNG in fiscal year 2024-25 (April-March), of which roughly 22 million mt was consumed for thermal power generation. The company also purchased 5 million mt of spot LNG in FY 2024-25.