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Facing an unprecedented energy crisis, Japan signed a memorandum of cooperation with Malaysia’s state-owned energy firm Petroliam Nasional Bhd (Petronas) to explore joint investments in gas exploration and production. Japan’s LNG supply is under a threat due to the Russia-Ukraine war, which has also left Europe scrambling to secure more fuel before the onset of winter.
Apart from gas exploration, Petronas will also allow Japan to utilize its LNG storage tanks in case of an emergency. Japan’s trade ministry and Petronas signed the memorandum of cooperation at the LNG Producer-Consumer Conference in Tokyo on Thursday.
Japan LNG woes
Japan has been exploring options to secure a stable supply of LNG after Russia took control of the Sakhalin-2 project, which supplies nearly 60% of its gas production to the island nation.
Russia earlier accused Japan of benefitting from the Sakhalin-2 project while being an ‘unfriendly nation’. Tokyo has joined US and Europe in imposing a wide range of economic restrictions on Russia but did not step back on any energy deals.
Japan is the largest buyer of LNG in the world and is heavily reliant on foreign sources for its energy supplies. The war in Ukraine, and more recently the suspected sabotaging of Russian gas pipelines to Europe, are likely to put additional pressure on the LNG supply.
While the European Union tries to secure additional fuel for winter, Japan is considering a joint upstream investment, technical cooperation on cutting methane emissions and mutual assistance in fuel supply and use of LNG tanks, as part of its deal with Petronas.
Japan’s agreement with Petronas also opens doors to more such partnerships in the region for investments in natural gas. Some other Japan LNG companies are already working with Petronas to secure supplies. Additionally, the government is working on creating a framework for state-owned Japan Oil, Gas and Metals National Corp. to import LNG in bulk if private market suppliers are unable to secure enough cargo.
Back in 2018, Petronas signed an agreement with Tokyo Gas to supply LNG for 13 years. Some Japanese firms such as Sumitomo Corp, Tokyo Gas and Japan Petroleum Exploration are separately collaborating with Petronas for carbon neutrality and alternative fuels which have minimal impact on the environment.
On September 27, Petronas signed a memorandum of cooperation with the Ministry of Economy, Trade and Industry of Japan as well as a memorandum of understanding with the Japan Bank for International Cooperation to pursue mutual sustainability goals of carbon neutrality.
