In the wake of their nuclear moratorium, secret documents from Japan’s government reveal a desperate plea to the US government for LNG imports. Here’s a top LNG stock to own before Japan’s lack of energy supplies plunges the country into darkness…
Two… maybe three weeks.
That’s the approximate length of time Japan’s LNG stockpiles would last if supplies were disrupted.
To think that the world’s third largest economy – and the recent victim of an earthquake, tsunami, and nuclear disaster – has only 2-3 weeks worth of insurance against energy supply disruptions is almost unimaginable.
If those supplies were to run out, a shocking “1/3 of Japan would face (a) quick blackout,” according to the Japanese Trade Ministry’s petroleum and natural gas division.
Bloomberg News recently uncovered this revelation.
In an inquiry to the US Energy Department under the Freedom of Information Act, Bloomberg uncovered details of an alarming set of documents that were received last year from the Japanese.
The 2012 documents show that in the aftermath of Fukishima, Japan was making the switch from nuclear to natural gas-fired power plants — shutting down or converting 54 reactors that provided 25% of the country’s power. However, those plants would depend on a caravan of liquefied natural gas tankers steaming across the oceans, leaving the country vulnerable to supply disruptions.
Because of the heightened risk – especially in the summer months, when power demand in Japan is at its highest – Japanese officials warned of the probability of a catastrophic power failure as it prepared to close its last operating atomic reactor last year.
In light of that, Japan had been planning to restart a number of their nuclear reactors — that is, until the recent leaks at Fukushima threw a wrench in the timeline.
“After the Fukushima leak… I actually think the prospects of nuclear reactors coming back online have diminished considerably,” said Izumi Devalier, a Japan economist at HSBC Holdings Plc in Hong Kong.
Where Devalier was expecting to see as many as 10 reactors turned back on in 2014, now she doesn’t foresee until 2015.
The documents further revealed that Japan – already the world’s largest buyer of liquefied natural gas – urgently requested for LNG imports from the US to help diversify its supply chain and reduce risk.
The Middle East currently supplies about 31% of Japan’s LNG needs (Australia supplies the rest) — but being so reliant on a relatively unstable part of the world could present severe problems.
Last year, Iran threatened to disrupt the Strait of Hormuz, one of the world’s most vital choke points, in response to sanctions against them for its alleged nuclear weapons program.
The current crisis in Syria is now another potential catalyst for supply disruptions to Japan.
Should tensions escalate in either Iran or Syria, even a small drop in LNG deliveries could prove disastrous for the Japanese.
As such, steady shipments of LNG from the US would no doubt help to reduce Japan’s reliance on Middle Eastern production.
Without the aid of nuclear plants or US LNG supplies, it would seem that Japan would have to play Russian Roulette each and every summer for the foreseeable future.
However, with recent developments in the US natural gas industry, help may be on the way…
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The US government has taken steps to advance the approval of export terminals that would allow for LNG products to be sold to countries with which we don’t have free trade agreements.
Last year, the Energy Commission rubber-stamped its very first terminal at Sabine Pass in Cameron Parish, Louisiana.
This year, three more facilities were approved – two of which will have significant implications for Japan.
In May, the Freeport LNG terminal in Texas was given the green light and has agreed to supply gas to Japan’s Chubu Electric Power Co. and Osaka Gas Co.
Although Freeport’s approval has given the Japanese some peace of mind, it’s of little value to investors as Freeport is privately-held.
However, the Energy Commission’s latest approval certainly has investors everywhere buzzing with excitement…
Earlier this month, Dominion Resources Inc. (NYSE:D) was granted authorization to export LNG from its Cove Point terminal in Maryland at a daily rate of up to 22 million cubic meters (770 million cubic feet) of natural gas for 20 years.
Cove Point is expected to come online in 2017, when it will begin supplying LNG to Tokyo Gas Co. and Kansai Electric Power Co.
While it’s still a few years before the first shipments arrive, the opportunity to receive reliable volumes of LNG for two decades may well be worth the wait for Japan.
And the ongoing anticipation will likely keep investors bullish on Dominion, especially as more terminals in waiting are set to revolutionize the US LNG industry over the coming decade.
If you’re looking for a way to play this opportunity, Dominion is a top stock to do it.