Japan's Saibu Gas may look to develop LNG reload business following storage expansion

Japan's Saibu Gas will consider expanding its LNG reload business into supplying cargoes to LNG carriers once the huge new storage tank at its Hibiki terminal in the country's southwest starts up at the end of the decade, a company official told S&P Global Commodity Insights Nov. 28.

The Fukuoka-based city gas utility took the final investment decision to build a third LNG tank at Hibiki on Nov. 28, with construction set to start in the summer of 2025 with a view to completion in the first half of fiscal year 2029-30 (April-March).

Saibu Gas' decision to build the 230,000 kl tank, which will be the largest onshore LNG storage tank in Japan, comes as it sees growing demand for natural gas in its service areas, with more companies transitioning away from oil and coal to the lower carbon fuel.

The company also said the expansion of its storage capacity would contribute to stable supply as well as helping it develop a global business using the Hibiki LNG terminal.

Saibu Gas will over the next few years assess the need for additional LNG procurement based on demand from customers wishing to switch from using fuel oil and coal to natural gas, the official said.

It will then consider the possibility of supplying LNG reloads to LNG carriers, the official said.

The FID, valued at about Yen 50 billion ($329 million), includes building the 230,000 kl tank as well as other facilities including a regasification unit, two BOG (boil off gas) compressors and tank truck shipment facilities.

Hibiki terminal

The Hibiki LNG terminal, owned 90% by Saibu Gas and 10% by Kyushu Electric, currently has two 180,000 kl LNG storage tanks and has a pipeline to receive gas from the adjacent Kitakyushu LNG terminal, in which Kyushu Electric has a 75% stake with the balance held by Nippon Steel.

The Hibiki terminal has been engaged in the LNG reload business since 2020, reloading LNG shipments onto ISO containers, with its proximity to other Asian markets including China advantageous for such operations, according to the company.

The terminal has also carried out gas-test and cool-down operations for new LNG carriers or those that have just completed maintenance.

Saibu Gas procured a total of 841,000 mt of LNG in the fiscal year 2023-24 (April-March), comprising imports of 391,000 mt from Malaysia, 64,000 mt from Russia's Sakhalin 2, and 322,000 mt from a Tokyo Gas supply portfolio, including from Australia. The total procurement volume also includes piped supply of 64,000 mt of LNG equivalent from the Kitakyushu LNG terminal.

The move to expand storage capacity by Saibu Gas comes on the heels of the Ministry of Economy, Trade and Industry unveiling a set of proposed LNG policy steps Nov. 8, including a first-of-its-kind measure to help build new LNG storage tanks for the country's energy security.

The proposals were made during a METI subcommittee on energy resources development meeting, which included the utilization of surplus LNG storage tanks in Japan and abroad to secure physical storage capacity; bolstering joint LNG procurements, and adding a new risk-money function to state-owned Japan Organization for Metals and Energy Security to help develop the LNG sector to support stable supply.