Japan’s Push for Gas Exchange to Face Pipeline-Network Hurdle

From Bloomberg

By Chou Hui Hong, Tsuyoshi inajima and Heesu Lee

Japan’s effort to set up a natural gas exchange may be hampered by the lack of a pipeline network across the country, according to a government subcommittee.

Japan is considering setting up the exchange as part of measures to deregulate the country’s retail gas market amid surging fossil fuel import costs and nuclear reactor shutdowns. A subcommittee of Japan’s Ministry of Economy, Trade and Industry will start discussions in coming months about the feasibility of a wholesale exchange.

“In theory, it’s possible to establish a wholesale market,” said Hirotaka Yamauchi, head of the METI subcommittee. “But there would be the problem of how to transport traded gas without a comprehensive pipeline network.”

Gas-fired power replaced nuclear energy as Japan’s main source of electricity after an earthquake and tsunami struck the Fukushima Dai-Ichi atomic plant in March 2011. Japan, the world’s largest buyer of liquefied natural gas, spent 7.06 trillion yen ($68.8 billion) to import a record 87.5 million metric tons of LNG in 2013, compared with 3.47 trillion yen in 2010, the year before the disaster in the country’s northeast prompted it to shut all its nuclear reactors.

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