First-ever production of LNG from a domestic Japanese gas source underpins a supply contract signed late last year between Japex and Asahikawa Gas Co. (AGC), a local distributor in the northern island of Hokkaido.
All other LNG used in Japan is imported, said Japex. (See accompanying photograph)
Rail transit
Japex has been operating the Yufutsu oil and gas field in Hokkaido since 1996. Production from the field, currently at 10 MMcfd, will rise to 40 MMcfd by 2005. Natural gas is delivered through a 45-mile pipeline to various customers in the Tomakomai, Chitose, and Sapporo areas for household and industrial use.
Hokkaido has no LNG receiving terminal, and the Yufutsu field is at present the only source of natural gas for the island's users. AGC, which currently uses LPG, has wanted to switch to natural gas for many years, said Japex, but its limited market and the remoteness of the Yufutsu field had precluded laying a 120-mile pipeline.
Japex, however, conceived the idea of liquefying Yufutsu gas and delivering it by specially designed rail containers over existing railways. The company used this method to supply imported LNG to remote customers on the main island of Honshu (OGJ, Aug. 21, 2000, p. 48).
The company estimated the initial investment to be far less than the originally planned pipeline supply.
Construction of the liquefaction plant, with a capacity of 150 tonnes/day and storage capacity of 1,000 tonnes, will begin in second quarter 2001 for delivery to AGC in early 2003. The contract has been awarded to Nippon Steel Corp.
Scattered demand
Japex said that liquefaction plants of similar size are often found in the US for peak-shaving needs, but Japex's plant is designed to operate year-round to meet AGC's base demand, with seasonal fluctuations in production rate in accordance with demand.
In addition, said the company, there is no need for a large storage capacity or a regasification facility, as in a peak-shaving plant.
Japex believes that potential demand for LNG in Hokkaido could be large.
There are 15 local distribution companies LDCs in Hokkaido, isolated from each other, each with only limited demand.
Japex considers demand size and isolation to be the two key factors, and neither a new pipeline nor LNG import facility is feasible for LDCs, as both require huge capital expenditures.
A small LNG plant and delivery via existing railway would be the best solution. Japex is targeting six areas in Hokkaido, including Hakodate (160 miles from the Yufutsu field), Muroran (50 miles), and Obihiro (120 miles) for LNG production capacity expansion, in accordance with demand growth.
