Asian natural gas importers race to stock up ahead of winter

Japan, South Korea, and China are increasing the pace of stockpiling on natural gas ahead of the winter with inventory levels above the five-year average as the biggest energy importers in North Asia look to avoid buying LNG on the spot market during the winter.

LNG inventories at city gas providers in Japan are well above seasonal norms based on the most recent data from those providers cited by Reuters.

Japan and South Korea have also called for energy conservation to avoid shortages this winter, while gas demand in China is set for its first annual drop in at least two decades this year, due to the sporadic Covid lockdowns across the country.

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Still, gas supply risks persist amid a global energy crisis and Europe hauling in record volumes of LNG at the expense of north Asia.

China is expected to mostly stay away from spot LNG purchases this winter, analysts say. Weakening gas demand, increased domestic gas production, policies to support coal as the “energy security” tool, and of course, the much higher spot LNG prices this year have all combined to reduce Chinese purchases of LNG so far in 2022. Chinese imports of LNG are set for the largest-ever annual plunge, according to Wood Mackenzie. The consultancy expects China’s LNG imports to drop by an unprecedented 14% this year—the steepest annual drop since China first imported LNG back in 2006.

Li Wei, a gas market executive at state energy giant PetroChina, told Reuters on Thursday, “Our winter supply policy is stabilizing piped gas imports from Central Asia, boosting volumes from Russia and increasing domestic production.”

Despite the relatively comfortable inventory levels in China, Japan, and South Korea, calls for curbing energy use have continued in recent weeks.

Japan, for example, is calling on people and businesses to repeat the energy conservation drive from the summer this winter, as energy scarcity and LNG price inflation continue to take a toll. South Korea, for its part, is keeping temperatures at state-owned buildings below 17 degrees Celsius (62.6 F) and is reducing indoor and outdoor lighting from October to March to cut power consumption.