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Russia Exploring LNG Storage In Japan

Russia is looking at the possibility of storing LNG on Japan’s southern island Kyushu in a bid to reduce shipping costs and to make it easier to meet spot demand from China.

Bloomberg reported that Novatek PJSC is looking at growing its storage network in Asia, because the shipping costs of bringing the gas from its origin in the Arctic are expensive, not to mention the time it takes to deliver it.

The firm has already signed a preliminary agreement with Saibu Gas Co, which would allow it to use the Japanese company’s storage facilities.

Saibu recently stated that it was looking into constructing two additional LNG tanks, as well as upgrading its re-exporting capability. This would be of benefit to Novatek, as it would be able to store some gas in the Asia-Pacific region.

Novatek is also looking at taking a shorter shipping route to the region, by travelling through the Northern Sea rather than through the Mediterranean and Suez Canal.

Speaking to the news provider, Nicolas Browne, an analyst with Wood Mackenzie Ltd, said: “Given its LNG sources are very far from Asia, storage and re-loading will enable it to capture shorter-term arbitrage opportunities.”

China’s demand for LNG is expected to increase as it continues with its efforts to replace coal with natural gas.

There could be an opportunity to capitalise on less LNG arriving in China from other sources. For instance, Reuters recently reported that the number of LNG vessels that travelled to China from the US fell by 20 per cent in 2018 as a result of the trade war between the two nations.

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