Japan to formalize government involvement in LNG procurement in new strategy: source

Japan's Ministry of Economy, Trade and Industry intends to formalize the government's enhanced involvement in LNG procurement in its forthcoming LNG strategy, a METI source told S&P Global Commodity Insights April 26, as the government sees its involvement as among key measures to ensure supply security.

The move by METI will come at a time when Japan has grave concerns about security of LNG supply in the short term amid uncertainty over the war in Ukraine as well as in the mid to long term because of companies' difficulty committing to long-term LNG supply.

METI aims to release a draft of the new LNG strategy in several months with a focus on security, which will likely include the government's involvement in LNG procurements for the first time, the source said.

It will be the first time the government is directly involved in the country's LNG procurement, which is currently done by the private sector, the source said.

The move would enhance the country's involvement of LNG procurement, which are currently provided via state-owned Japan Oil, Gas and Metals National Corporation (Jogmec) in the form of financial support for upstream to midstream projects, the source said.

It was unclear exactly how the government will step up its involvement.

State-owned Jogmec provides equity capital to Japanese companies' oil and gas E&P projects to mitigate their financial risks as well as issues liability guarantees to support their finance for the upstream projects.

It also provides equity capital and liability guarantees for the midstream LNG terminals and trans-shipment projects to secure stable LNG supply for Japan.

METI had earlier planned to release a draft LNG strategy in April after having delayed from an initial plan to release it in late February in the wake of Russia's invasion of Ukraine.

Supply security

The latest move comes after Japan said March 31 it will consider ways for the government to enhance its involvement in the country's LNG procurement as part of its emergency response to energy security concerns.

Since a policy meeting April 14, METI has said it will make efforts such as urging gas producing countries to ensure stable LNG supply as well as support acquiring stakes in upstream to midstream projects and help alternative LNG procurements in the short-term as part of its policy response to the Russia-Ukraine crisis.

METI minister Koichi Hagiuda said April 15 that Japan intends to focus on supporting companies' involvement in LNG expansion projects to swiftly secure additional supply and reduce its Russian energy dependency.

In the long term, METI has also said the government will proceed with enhancing its involvement in the country's LNG procurements and its control to be better prepared for a crisis in response to events such as LNG supply disruptions among other steps.

Such government moves come as Japanese companies are increasingly finding it difficult to commit to long-term LNG supply contracts amid uncertainty over demand, coupled with increased pressure for carbon neutrality.