Japan, IEA to focus on role of LNG for demand growth, finance at LNG-PCC in Hiroshima

The role of LNG for energy security and as a lower-carbon transition fuel will be a focus of the LNG Producer-Consumer Conference 2024 on Oct. 6 in Hiroshima, western Japan, according to a final draft of a discussion paper obtained by S&P Global Commodity Insights Sept. 27.

The event co-hosted by Japan's Ministry of Economy, Trade and Industry and the International Energy Agency will draw public and private delegates from LNG producing and consuming countries, as demand for the lower carbon fuel gets impacted by various levels of uncertainty despite its need for a transition, according to the paper.

In their first-ever joint discussion paper on LNG, METI and the IEA noted that "demand for LNG is growing, particularly in Asia, and in a scenario based on today's policy settings, is expected to increase steadily through 2030."

"However, the future demand trajectory remains uncertain, and the role of natural gas and LNG in energy transitions remains subject to a wide range of possible outcomes, depending on the sector, geography and timeframe," the paper said.

Various scenarios

The joint discussion paper acknowledged LNG demand growth through 2030 as organizations including the IEA having published various scenarios against the backdrop of a changing energy environment.

The IEA's World Energy Outlook has projected global LNG markets looking amply supplied until 2040 in its Stated Policies Scenario, while its the Announced Pledges Scenario projects LNG demand peaks by 2030 and projects under construction are sufficient to meet demand. Its Net Zero Emissions by 2050 Scenario expects LNG demand can be met in aggregate with existing projects.

The discussion paper noted that "there are diverse views on future LNG demand, reflecting a high level of uncertainty. This should be considered when discussing supply security issues going forward."

Clarifying role

The discussion paper also called for governments to clarify the role and necessity of LNG and determine the need for LNG financing in a coordinated manner after having updated the definitions of financed emissions and transition finance.

"Natural gas and LNG can contribute to energy transitions by supporting the shift away from coal and the deployment of variable renewable energy sources," the paper said. "Therefore, the lack of appropriate financial support may hinder emissions reductions in the real economy."

It also called on the need to make efforts to combat climate change through the decarbonization of entire LNG value chains, the reduction of methane emissions from upstream operations to downstream gas-fired power plants, and the development of low-carbon LNG products.

Gas security

The joint discussion paper also revealed that the IEA started a METI-funded, two-year work program on gas supply security and the role of gas and LNG, with an aim to prevent a recurrence of the 2022-2023 energy crisis triggered by Russia's invasion of Ukraine and to foster global gas security in conjunction with an orderly energy transition.

The IEA work plan includes a detailed assessment of lessons learned from past energy crises, a proposed study on voluntary gas reserve mechanisms, sensitivity analysis around long-term gas and LNG demand, and a roadmap for low-carbon LNG technology deployment, according to the joint discussion paper.

The LNG-PCC is to take place alongside the Oct. 7 general assembly of the International Group of Liquefied Natural Gas Importers, known as GIIGNL, in Hiroshima, where the G7 leaders addressed in May 2023 the need to accelerate the phase out of Russian energy dependency, including through energy savings and gas demand reduction, in a manner consistent with the Paris commitments.

The G7 Hiroshima communique also noted the important role of increased deliveries of LNG and acknowledged investment in the sector, and the G7 Apulia leaders' communique in June endorsed those views.

The Japanese government is currently in the midst of negotiations with the Italian government to work out bilateral cooperation including on the security of emergency LNG supply, with an eye to have it agreed and announced at the LNG-PCC, a Japanese government source said.