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Japan Energy Transition Threatens LNG Demand

Japan’s ambitious energy shift to renewables is threatening future demand for liquefied natural gas as the country is the world’s largest importer of the commodity, Bloomberg reports.

Japan last week unveiled plans to boost renewable power generation capacity twofold over the next ten years, cutting the share of fossil fuels in its energy mix to less than 50 percent. The plan will involve halving the amount of energy Japan generates from liquefied natural gas over the period.

Bloomberg quotes traders and analysts as saying these ambitions could see LNG imports to Japan drop by a third by 2030 and will also put an end to long-term LNG supply deals that currently account for most of the country’s LNG supply.

“The move will further dampen Japanese LNG buyers’ appetite to sign long-term deals that extend beyond 2030, which could leave them more exposed to short-term price dynamics if demand ends up higher than targeted,” the report quoted Credit Suisse energy analyst Saul Cavonic as saying.

Achieving the goal of cutting carbon dioxide emissions by 46 percent from 2013 levels by 2030 may prove difficult. The target is 77 percent higher than Japan’s earlier emissions-cutting commitments, according to a Wall Street Journal report on the new energy plan. It will involve a substantial increase in solar and wind generation capacity in a country where available land is scarce.

The plan envisages a continued reliance on coal, which is problematic, as well as boosting the share of nuclear generation in the energy mix to compensate for the drop in LNG supplies, which would necessitate overcoming local opposition to the restarting of nuclear reactors and running these reactors at unrealistic rates, according to one member of the advisory committee that worked on the plan, International University of Japan vice president Takeo Kikkawa, who spoke to the WSJ.

By Irina Slav for Oilprice.com


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  • Mamdouh Salameh on July 27 2021 said:
    What kind of energy transition is that threatens LNG demand but envisages a continued reliance on coal?

    I would understand Japan’s ambitions to boost renewable power generation capacity twofold over the next ten years and cutting the share of fossil fuels in its energy mix to less than 50%. But I can’t understand the logic behind halving the amount of energy Japan generates from LNG over the period while continuing its reliance on coal. Why not reduce reliance on coal and increase the use of LNG?

    I thought energy transition aims to reduce emissions. How could this be achieved with continuing reliance on coal which is the most pollutant among fossil fuels while cutting by a third the use of LNG which is the least pollutant?

    This is twisted logic unless Japan is seeking to use the cheaper coal instead of the more expensive LNG at the expense of emission-reduction.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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