LNG prices may rise by $5

German’s recent decision to shut seven atomic power reactors,with a combined capacity of 7.4 GW,for three months in the wake of Japan crisis will further result in increase in demand which would drive the prices in short term. While non-coking coal prices are expected to go up marginally because of incremental demand,coking coal prices,however,likely to fall owing to the temporary shutdown in steel capacities in Japan,Crisil said its report.

The research said nuclear power generation in Japan has been adversely impacted by the earthquake and consequent tsunami. Shutdown of 11 reactors has caused a total loss of 12.4 GW of power capacity,which comprises about 5% of Japan’s aggregate power generation capacity.

The research pointed out that Japan is the world’s largest producer of nuclear power,which accounts for around 30% of the country’s total power generation. The plants that were shut down owing to earthquake,represent an estimated 25% of its nuclear power capacity,implying a shortage of power supply and the shortfall will have to be met with by coal or LNG-based capacities,thus resulting in higher imports of coal,LNG and petroleum products.

It is noted that the majority of the regasification capacity in Japan has not been affected by the tsunami. This is crucial since it is expected the country’s LNG imports to increase as the government tries to meet the power deficit (caused by the nuclear plant shutdowns) through gas and coal-based power plants,the Crisil research pointed out.

As Japan does not have reserves of gas and crude oil,it imports more than 80% of its energy requirements.

It is expected that 60% of the shutdown power capacities will be substituted with coal-based capacities,while LNG-based capacities will make up for the rest. The 40% substitution with gas-based capacities to boost the gas demand by 6 to 8 million tonne per annum which represents around 11% of the total global spot LNG trade in 2009. This would in addition to Japan’s substantial LNG imports of 63.9 MTPA,which account for 35% of total LNG trade during 2009.