Strait of Hormuz contingency to have 'significant impact' on LNG market: JERA global CEO

Any contingency in the Strait of Hormuz will have a "significant impact" on the LNG market, including spot prices, Yukio Kani, global CEO and chairman at JERA, told Platts, part of S&P Global Energy, on June 18.

"Regarding the risks in the Strait of Hormuz, it may sound cliche, but we are watching it quite carefully," Kani said on the sidelines of the Japan Energy Summit & Exhibition in Tokyo.

"If something happens, spot prices will rise in the short term, which would have a significant impact," he said, adding that JERA, Japan's largest power generation company, procures "a little over 10%" of its LNG supply via the Strait of Hormuz.

The conflict between Iran and Israel has heightened fears of disruptions to oil exports from the Middle East, particularly through the Strait of Hormuz -- a vital chokepoint through which about 20% of the world's oil and LNG transit daily.

Platts JKM spot LNG prices edged up on June 17 due to supply concerns amid rising geopolitical tensions in the Middle East.

Platts assessed JKM --the benchmark price reflecting LNG delivered to Northeast Asia -- for August at $13.948/MMBtu on June 17, up 4.8 cents/MMBtu, or 0.34%, day over day.

Following a series of geopolitical issues in recent years, JERA is working to diversify its investments and LNG procurement sources, Kani said.

"We need to return to the basics," Kani said. "We must diversify our investments and procurement."

"For LNG procurement, we should properly identify bottlenecks related to specific countries or regions, instead of relying on one project," Kani said.

"We should buy from multiple projects to avoid the risks associated with project-specific incidents," he added. "We need to diligently diversify our approach. That is the only way forward."