Resource-scarce Japan is strategically fortifying its liquefied natural gas (LNG) supply chain, forging partnerships with key allies Australia and the United States.
The move comes as pivotal contracts with providers like Russia are set to expire by the early 2030s, heightening concerns about potential disruptions in gas access following geopolitical tensions.
According to Reuters, JERA, Japan’s largest power generator, recently finalized a deal to acquire a 15.1% stake in Woodside Energy’s Scarborough project in Australia, marking a significant step in diversifying its LNG procurement.
LNG constitutes a crucial component of Japan’s energy portfolio, comprising approximately one-third of its power generation.
Despite a decline in imports last year, attributed to increased utilization of renewable energy and nuclear power post-Fukushima disaster, Japan remains heavily reliant on LNG imports to meet its energy needs and is the world’s second-largest importer behind China.
Japanese LNG buyers have been actively pursuing equity deals and long-term offtake contracts in Australia and the United States, striking equity deals in five projects in Australia and the U.S. including an exploration block.
They have secured 10- to 20-year offtake contracts from those countries for more than 5 million metric tons annually, or 8% of Japan’s 2023 consumption, according to a Reuters calculation, overshadowing transactions elsewhere in the world.
Despite political challenges, such as new carbon emissions regulations in Australia and regulatory freezes in the U.S., Japan’s commitment to securing LNG from these allies remains steadfast.
Kyushu Electric Power, one of Japan’s leading utilities, is exploring opportunities to invest in Energy Transfer’s Lake Charles LNG project in the U.S., underscoring the appeal of North American and Australian projects due to their supply stability and strategic partnership with Japan.
“North America and Australia still have supply stability compared to other projects,” Kyushu Electric Executive Officer Takashi Mitsuyoshi said.
“There are some concerns about North America due to the recent (LNG) move by Biden, but they, along with Australia, are allies and that means a lot.”
