TOCOM Energy

Japan reaches deal on emergency LNG supplies from Petronas

THE NIKKEI Asia via scoutAsia

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October 6, 2022 2 min read
Japan reaches deal on emergency LNG supplies from Petronas

Japan has signed a memorandum of cooperation with Malaysian state oil giant Petronas with an eye on obtaining liquefied natural gas during a supply crunch or another emergency, as Tokyo prepares for the global competition for the fuel to grow as winter approaches.

Japan's Ministry of Economy, Trade and Industry announced the deal on Thursday at the virtual LNG Producer-Consumer Conference. Malaysia, among the world's largest producers of natural gas, was responsible for 13.6% of Japan's LNG imports in 2021 -- more than any other country but Australia.

Japan and Petronas will also consider jointly investing in LNG extraction and production and eventually sharing storage tanks. Malaysia is closer to Japan than other LNG producers, like the U.S. or Middle Eastern countries, and Japan hopes to be able to ramp up shipments from Malaysia quickly in an emergency.

Japan, in turn, will cooperate with Malaysia on emissions-reducing technology. Singapore also expressed an interest in stronger cooperation with Japan at the conference. Japan's economy ministry will explore joint investments in LNG-related fields and collaboration during crises. It will consider working with other countries on joint gas procurement and other areas.

Japanese demand for LNG rises in the winter. But Southeast Asia has little need for heating and is likely to have a surplus, the ministry reasons. Japan acquired LNG from Thailand during a supply crunch in January 2021.

The Japan Bank for International Cooperation and Nippon Export and Investment Insurance will help Japanese utilities source LNG as well. JBIC will provide low-interest loans to buyers, while Nippon Export and Investment Insurance will provide coverage for private-sector lenders that finance LNG purchases.

LNG prices have surged as Europe boost imports from the U.S. and elsewhere to curb dependence on Russian gas. Japan could also see its LNG shipments from Russia dry up and is working to secure a stable supply before winter.

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The English translations provided through this service are the result of automatic and mechanical translation of contents written in Japanese and created by Nikkei or licensed by a third party, by an automatic translation system provided by a third party after certain processing of the contents by Nikkei. Nikkei disclaims all warranties, express or implied, related to the English translations, including any warranty of accuracy, reliability, validity and fitness for a particular purpose. Users shall use this service with the full understanding that it employs an automatic translation system that automatically and mechanically recognizes and analyzes information and outputs the results.