Japan is ramping up LNG reserves as a possible Russian gas cutoff source


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TOKYO – The Japanese government has asked energy companies to replenish their liquefied natural gas (LNG) reserves and share energy resources, a person familiar with the emergency plan said, as civilian deaths in Ukraine urge Tokyo to halt Russian fuel imports.

Utilities scramble for already-stretched energy sources while resource-poor Japan joins the West in punishing Russia, a major oil and gas producer — a quest complicated on Friday when Prime Minister Fumio Kishida announced a ban on Russian coal and other sanctions .

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Kishida, who faces national elections in July, is trying to balance energy security for the world’s third-biggest economy against mounting pressure on the Group of Seven industrial powers for tougher sanctions on Russia as allegations of atrocities in Ukraine spread.

The International Criminal Court is investigating what Ukraine and several G7 leaders have described as Russia’s war crimes in Ukraine. Moscow denies the allegations and denies targeting civilians in a so-called “special military operation” to demilitarize and “denazify” its neighbor.

Japan’s Industry Ministry has ordered energy companies to ensure they have three-week reserves and urged gas and electricity companies to sell each other replacement gas instead of offering it overseas, the source told Reuters.

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Ministry officials are also discussing LNG measures with industry officials, said the source, who asked not to be identified because they are not allowed to speak to the media.

Officials at the Department of Economy, Trade and Industry said no one was available to comment. The prime minister’s office declined to comment, referring questions to relevant ministries.

The measures would be modest, consistent with actions taken by utilities during a power crisis last year, and Russian LNG accounts for just 3% of Japan’s total power generation.

But Japan has little room for error. Generation capacity was stretched by the closure of nuclear power plants after the 2011 Fukushima disaster. An earthquake last month that temporarily shut down some power plants prompted warnings of power outages.

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Japan wants to reduce its dependence on Russian energy but will continue to import oil and gas projects from Sakhalin in Russia’s far east, in which the Japanese government and companies have interests, Kishida said recently.

Whether Japan can keep Sakhalin gas flowing has become less certain after Russia threatened to cut off gas to “unfriendly” European countries if they didn’t pay in rubles.

Unlike European countries, which can store LNG reserves underground for months, Japan only has enough storage space to store the super-cooled fuel for three weeks.

As uncertainty about Russian energy imports grows, Japanese utilities have started exploring ways to replace Russian gas, which accounts for 9% of the LNG consumed in Japan. It is used to generate electricity and is also piped to homes and businesses.

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“In the event that it becomes impossible to obtain the (Sakhalin LNG), we will look for other sources or source from other companies,” Kensuke Matsufuji, the president of Hiroshima Gas Co, said last week.

The company, which supplies Kishida’s hometown and gets half of its LNG from Russia, is in talks to buy gas elsewhere, including from Malaysia, a company spokesman told Reuters.

Tokyo Gas Co, which gets a tenth of its LNG from Russia, is also trying to buy more gas directly from producers to avoid spot markets, where it costs about five times as much.

The company has approached LNG producers in the United States but has yet to win a commitment for increased supplies, President Takashi Uchida told the Nikkei newspaper.

A Tokyo Gas spokesman said the company could increase its supplies from the United States under existing contracts, but declined to say if it had asked for it. (Reporting by Ritsuko Shimizu, Yuka Obayashi, and Yoshifumi Takemoto; Writing by Tim Kelly; Editing by William Mallard)



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