Germany closes seven nuclear reactors for safety audit

Crisil Research, a division of Crisil, has predicted that spot LNG (liquefied natural gas) prices would surge in the international market following disaster at tsunami-hit nuclear installations at Fukushima Daiichi plant, 240 km off Tokyo in Japan.

It expects Asian spot LNG prices to move up to $13-14 per million British thermal unit (mBtu) over the next three to four months. Ever since the tsunami-triggered disaster, prices have jumped from $9 to around $11-12 per mBtu due to increased spot demand from Japan. Japan's big suppliers such as Indonesia, Malaysia and Australia have limited spot availability of LNG. This spot supply constraints, according to Crisil Research, is bound to feed the surge in prices. Japan could be forced to buy gas from other sources such as Qatar. “Suppliers like Shell are already diverting cargoes meant for Europe to the Asian market,'' says Crisil Research. In the wake of disaster at Japan nuclear facilities, the German Government announced the closure of 7 nuclear reactors with an aggregate capacity of 7.4 GW (Giga watt) for three months for safety audit. “Coal, lignite and gas-based plants are expected to plug the deficit caused by the closure of these plants,'' says the research report. This is expected to further accentuate the rise in international spot LNG prices. Spot LNG, according to Crisil Research, accounts for around 8 per cent of the total gas demand in India. LNG consumers include city gas distribution, captive power plants and small industrial units. “The gas acquisition cost of these units is likely to increase, thus affecting the demand,'' says it says.

Crisil Research expects 60 per cent of the deficit in power supply (in the wake of disaster at its Fukushima nuclear plant) to be met through coal-based generation capacities. “This could push up the country's annual requirement of thermal coal by around 12 million tonnes, which would be entirely met through imports,'' the report says . The incremental demand, however, will be insignificant proportion (less than two per cent) of the overall global trade. “Hence, the Japanese demand for thermal coal “is likely to translate into only $4 to $5 per tonne hike in our annual average Newcastle price forecast for 2011,'' says Crisil Research. Since imported coal accounts for only 6-7 per cent of the coal consumption of Indian power generation companies, Crisil Research expects players with dependence on spot purchases of coal to witness only a marginal rise in raw material costs.

Keywords: CrisilLNG