China, Japan and South Korea—the world’s largest importers of LNG—cut their collective intake by almost 7 per cent in the first five months of 2015 compared to the same time period in 2014, the U.S. Energy Information Administration (EIA) reported in its weekly natural gas update.

The three countries accounted for 61 per cent of global LNG imports in 2014, the EIA said, citing data from the International Group of Liquefied Natural Gas Importers. The government agency, a part of the U.S. Department of Energy, attributed the reduced consumption to a variety of factors, including mild weather and government policies favoring other sources of energy for power generation.

South Korea saw the sharpest decrease in LNG imports, an average of 0.9 billion cubic feet per day (Bcf/d) or 15.1 per cent in January through May. Natural gas consumption in that country’s power sector has declined for the past two years as a result of government policies favoring coal and nuclear power over gas.

Though South Korea experienced a nuclear safety inspection scandal leading to the shutdown of several plants in early 2014, its nuclear power generation was up 3 per cent in first-quarter 2015. Coal use was up 8 per cent during that quarter while natural gas usage fell by 20 per cent. Flat demand, coupled with increased nuclear capacity with the restart of the Shin-Wolsong unit 1 and commissioning of Shin-Wolsong unit 2, is expected to further cut into gas-fired generation and continue to reduce gas imports.

Japan’s lower imports of LNG were part of the country’s reduced reliance on fossil fuels in general for power generation (7 per cent decline) while hydro generation rose by 16 per cent. Fossil fuel generation has declined despite the sharp decrease in global crude oil prices since second-half 2014. The EIA forecasts a continued reduction in demand for fossil fuels in coming years as Japan prepares for the restarts of two nuclear power plants—Sendai Unit 1 in August and Sendai Unit 2 in October.

China’s drop in LNG imports is related to its increased reliance on cheaper imported pipeline gas. The Chinese Customs Agency reported a 22 per cent hike in pipeline imports, or 0.6 Bcf/d, compared to an 8.7 per cent reduction in imports of LNG.

The EIA also reported that the U.S. benchmark natural gas price at Henry Hub, Louisiana, rose by 1 cent to US$2.90 for the week, while storage was recorded at 2.88 trillion cubic feet, or 26 per cent above a year ago. Natural gas drilling rigs in operation decreased by two to 216.

Joseph Markman can be reached at jmarkman@hartenergy.com.

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