Japan Considers Boosting LNG Stockpiles via Overseas Hubs and Diplomacy

April 12, 2021|LNG, natural gas

Chart of the sources of Japan's LNG imports

Japan has fewer than three weeks of gas supply on-hand, and even less when it comes to the reserve for power generation. For a country that relies on LNG for around 40% of its power, that’s a fine margin.

The unprecedented spike in LNG prices in January, coupled with shipping problems that made quick delivery of the fuel nigh impossible, revived a long-running concern among Japanese bureaucrats that this just-in-time supply system needs an overhaul.

The Agency of Natural Resources and Energy (ANRE) has once again put forward the idea of creating an LNG stockpile for Japan, similar to the oil reserves created in the wake of the 1970s crude supply shock. Rather than touting trillions-yen investments in underground repositories, however, this time ANRE is proposing a novel approach: a geographically diversified reserves network.

Multiple supply shocks in the last year
The common view among Japanese energy officials has traditionally been that gas is a less risky commodity. The country relies on the Middle East for around 80% of its oil supply – an acknowledged geopolitical risk in the world’s No. 4 importer. In contrast, Japan’s 75 million tons of LNG last year was sourced from 15 countries, with Asia-Pacific supplies accounting for over 60% of total.

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