Alaska Diary | Japan plans to support expansion of LNG projects in the United States to meet its energy needs

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Japan has long prioritized securing energy for the island nation, which has few of its own fossil fuel resources and no pipelines to crude oil or natural gas suppliers.

A pair of Japanese utilities helped launch the maritime liquefied natural gas trade when they signed a long-term contract in 1967 to take gas from the LNG plant that would be built at Nikiski on the east side of Cook Inlet. It was the second LNG plant in the world, and the only one on the Pacific for years. It closed after nearly half a century of production.

Now, with global LNG supplies tight, Russian gas of questionable political longevity, and most of its nuclear plants still shut down after the 2011 Fukushima plant disaster, the Japanese government is looking to North America. to help meet its supply needs.

The government is seeking to help fund the expansion of existing gas liquefaction plants on the U.S. Gulf Coast as one of the fastest options for long-term delivery of more fuel to the nation of 125 million inhabitants.

Japan is not immediately moving away from taking Russian LNG but is looking for alternatives.

“The United States has expansion plans for existing projects, which could increase production in a relatively short time, and Japanese companies are showing interest (in these projects),” the minister said. ‘Economy, Commerce and Industry’ Koichi Hagiuda at a press conference in Tokyo on May 10.

“Japan intends to help kick-start these US projects with public financial support and continue to cooperate with the US to stabilize global LNG supply,” he added.

Hagiuda traveled to the United States and met with Energy Secretary Jennifer Granholm on May 4.

“We expressed our intention to cooperate in areas such as upstream investments during the discussion,” he said of his meeting with Granholm.

With six LNG export terminals in operation on the Gulf and East Coasts, the United States was Japan’s fourth-largest LNG supplier in 2021, accounting for approximately 10% of Japan’s total LNG imports from a just over 74 million tonnes that year. Russia, with its two export terminals, supplied 9% of Japan’s LNG imports and was the country’s fifth-largest supplier, according to finance ministry data.

State-owned Japan Oil, Gas and Metals National Corp., known as JOGMEC, is the likely candidate to invest in new US LNG supply. The company provides equity for Japanese companies’ oil and gas exploration and production work, as well as loan guarantees to support financing.

JOGMEC’s ​​support for bringing more US gas to Japan is expected to go to existing projects where Japanese companies are already involved, including two on the Gulf Coast: the Sempra-run Cameron LNG terminal in Louisiana and Freeport LNG in Texas.

Participants in Cameron, which started in 2019, include trading houses Mitsui and Mitsubishi as well as Nippon Yusen shipper Kabushiki Kaisha (NYK Line). With an annual production capacity of 12 million tons, the partners are eyeing an expansion of more than 50%, targeting an investment decision next year.

On the Pacific, Mitsubishi is a partner in the Shell-led LNG project under construction in Kitimat, British Columbia. The terminal is expected to begin shipments in 2025, with possible expansion.

Osaka Gas and LNG importer JERA, a 50-50 joint venture between Tokyo Electric Power and Chubu Electric Power, are among participants in Freeport LNG, which plans to expand to add 5 million tonnes to its current annual production capacity. 15 million tons. . The terminal shipped its first cargo in 2019.

While focusing more on US projects, JOGMEC and Japanese trader Mitsui jointly own a 10% stake in the Arctic LNG-2 project under construction in Russia’s far north, with an expected start date l ‘next year.

Western sanctions against Russian companies, however, could delay the equipment, expertise and financing necessary for the project to reach full construction capacity of nearly 20 million tonnes per year, which the main partner, the gas producer Russian Novatek, had planned to achieve. by 2026.

The Japan Bank for International Cooperation in 2021 has signed on to participate in nearly $1.8 billion in project financing for Arctic LNG-2, joining Chinese, Russian and other banks in the package.

“Given the future demand for LNG in our country and around the world, we need to move forward with this project,” Mitsui CEO Kenichi Hori said of the Russian project at a conference in press on May 2. “Otherwise, the global energy balance will collapse or there will be shortages.”

Japanese companies also hold stakes in Russia’s first LNG export plant, Sakhalin-2, on Sakhalin Island, about 800 air miles north of Tokyo. The plant, which sent its first shipment to Japan in 2009, counts Mitsui and Mitsubishi among its partners.

Russia’s second LNG project, Yamal, started operations in 2017. Although no Japanese company has a stake in the project, the state-run Japan Bank for International Cooperation has helped finance the development, which is majority owned by Novatek, the same company leading the project. Arctic LNG-2 project.

And while the Japanese government seeks to help fund additional LNG capacity in the United States, Prime Minister Fumio Kishida told reporters on May 9 that the country would maintain its stakes in oil and gas production in Sakhalin- 1 and Sakhalin-2 in Russia.

He had said a day earlier during an online meeting of the leaders of the Group of Seven countries that Japan would “in principle” ban imports of Russian crude oil as part of a G-7 campaign. But it will take time, he said.

“We will take steps to phase out imports in a way that minimizes the negative impact on people’s lives and business activities,” Kishida told reporters.

In addition to funding from the Ministry of Economy, Trade and Industry, Japanese companies Itochu, Japan Petroleum Exploration Co., Marubeni and Inpex have stakes in Sakhalin-1, which was operated by ExxonMobil until decides to leave Russia.

The United States is set to claim the title of the world’s largest LNG exporter this year, a rapid rise to the top after the first exports from the Gulf Coast in 2016, fueled by the explosion in shale gas production and about 100 billions of dollars of investment in liquefaction capacity, storage tanks, docks and piers, and pipelines to transport feed gas.

A seventh US export terminal was commissioned earlier this year, and two more are under construction on the Gulf Coast.

Larry Persily can be reached at [email protected].

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