Japan’s JERA Co. Inc. said Monday it has signed a memorandum of understanding (MOU) with Korea Gas Corp. (KOGAS) to explore collaboration in liquefied natural gas (LNG), citing supply challenges from the Ukraine war.
“Under this MOU, for the sake of securing supply stability of LNG, JERA and KOGAS agreed to discuss opportunities for mutual collaboration in the LNG business including LNG swaps, trading, ship optimization, and market view exchange”, JERA said in a press release.
“Russia’s invasion of Ukraine has created a severe energy environment, such as the reduction of pipeline gas supply to Europe, and the uncertainty regarding global energy supply is drastically increasing”, it noted.
Japan reclaimed its position as the world’s biggest LNG importer last year, the International Energy Agency (IEA) said in its gas market report for the first quarter of 2023. It held that place from at least 2015 to 2019, according to a 2020 IEA report that forecast the world’s third-biggest economy would maintain that position until 2022, after which it would be overtaken by China.
South Korea was the second-largest importer in 2015 and 2016, overtaken by China from 2017 to 2019, the IEA said in the quarterly report. It predicted South Korea to be the number three LNG importer from 2019 to 2025.
“The combined LNG import bill of Japan and Korea rose by 80 percent to close to $115 billion, while LNG imports declined by two percent compared with 2021”, the IEA said.
Reliance on Russia
Japan imported 71.998 million metric tons of LNG last year, according to data from Japan’s Finance Ministry. The country bought 6.869 million metric tons of LNG from Russia and 4.136 million metric tons from the U.S. in 2022, data from the ministry showed. In 2021 it imported 6.567 million metric tons from Russia and 7.07 million metric tons from the U.S., according to ministry data.
Japan is expected to wean itself off Russian energy after a pledge by the Group of Seven (G7), of which it is part, in response to Russia’s invasion of Ukraine.
The G7, which also includes the U.S. and the United Kingdom, has committed to phasing out “our dependency on Russian energy, including by phasing out or banning the import of Russian oil”. The group however did not impose a timeline, opting to accomplish the phaseout “in ways that provide time for the world to secure alternative supplies”.
At the backdrop of uncertainty in global energy supply induced by the conflict, “JERA and KOGAS, which are among the largest buyers in the global LNG market, will strengthen their strategic relationship and consider developing schemes of cooperation regarding their LNG supply & demand, to enhance stable energy supply in Japan and Korea”, JERA said in the MOU announcement.
Positive LNG Outlook
In the long term, JERA sees an opportunity in the “acceleration of the Energy Transition to a carbon-neutral future”.
“LNG will play an even more important role as Transition Energy not only in Europe but also in Asia”, it said.
JERA said “to ensure a stable energy supply in Japan, JERA will continue to work together with LNG buyers and other leading companies both within and outside Japan such as KOGAS as it seeks to enhance procurement capabilities”.
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