Japan boosts reliance on allies Australia, US for long-term LNG supplies

By Reuters   March 10, 2024 | 07:50 pm PT
Japan boosts reliance on allies Australia, US for long-term LNG supplies
An LNG tanker seen in Japan. Photo by Shutterstock/VladSV
Resource-scarce Japan is shoring up long-term supplies of liquefied natural gas from close allies Australia and the United States as key contracts from providers including Russia are set to expire by the early 2030s.

Japan's biggest power generator JERA last month agreed to buy a 15.1% stake in Woodside Energy's, opens new tab Scarborough project in Australia. It was the latest in a string of deals as the fallout from Russia's invasion of Ukraine threatens to disrupt access to gas from its northern neighbour, making it more imperative to find reliable long-term supply sources.

LNG accounts for about a third of Japan's power generation and it is the world's second-largest importer behind China.

It remains a key part of Japan's energy mix even though imports fell by 8% last year tothe lowest since 2009as it has increased the use of renewable energy and restarted some nuclear reactors following a complete shutdown after the Fukushima disaster in 2011.

Since 2022, Japanese LNG buyers have struck equity deals in five projects in Australia and the U.S. including an exploration block. They have secured 10- to 20-year offtakecontractsfrom those countries for more than 5 million metric tons annually, or 8% of Japan's 2023 consumption, according to a Reuters calculation, eclipsing transactions elsewhere in the world.

Political issues including new carbon emissions rules in the Australia introduced in mid-2023 and President Joe Biden's freeze in January on new U.S. LNG export licence approvals have not dented Japan's appetite for long-term supplies from those countries.Kyushu Electric Power among the top five Japanese utilities, has said it is considering buying a stake in Energy Transfer's Lake Charles LNG project in the United States, even though it is now subject to the U.S. licence freeze.

That would be its second direct equity stake in gas production after Australia."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."Japan and the United States are members of the Group of Seven (G7) alliance of developed nations and are partners with Australia in another regional security body, the Quadrilateral Security Dialogue, also known as "the Quad".

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