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Japan Says Ready To Help Europe With LNG

Japan has suggested that it could step in and help Europe with natural gas supplies in the event of disruptions in Russian deliveries amid the continuing Ukraine crisis, Reuters has reported, citing Industry Minister Koichi Hagiuda.

The minister declined to comment on reports that the United States had reached out to Japan to ask if it could spare some of its LNG imports for Europe but said that "We would like to consider how we can contribute to the international community," noting that Japan had been a "driving force" in international LNG market development in the last few years.

Japan is one of the most resource-poor countries in the world but also one of the largest energy consumers. This has made the country one of the biggest importers of energy commodities. Japan is the biggest LNG importer in the world.

Because of its dependence on imported energy, the industry minister noted that the government will first ensure that local demand is secured before sharing any LNG with Europe in the hypothetical situation of a Russian supply disruption.

"We will see if there is anything that can be done after ensuring that the people's lives are not affected," Koichi Hagiuda said.

While the situation remains hypothetical, the implications for Europe's energy supply are, albeit also hypothetically, quite grim. The U.S. earlier this year reached out to Qatar, the world's largest exporter of LNG, to ask whether it could divert some supply to Europe in case of a disruption. But Qatar, it appears, is pretty much all booked with long-term contracts—the same kind the EU shunned in favor of spot market purchases of natural gas.

The U.S. itself is also hard-pressed to help with more LNG because it, too, has other buyers in other parts of the world. There is also the issue of limited LNG import capacity in Europe itself, which makes ramp-ups of LNG imports quite useless if they are needed to replace as much as 30 to 40 percent of European gas supply, currently coming from Russia.

By Irina Slav for Oilprice.com

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  • Mamdouh Salameh on February 04 2022 said:
    This is conditional on first ensuring that Japan’s domestic LNG demand is satisfied before sharing any LNG with Europe.

    The United States is orchestrating LNG supplies for the EU in the event that Russian piped gas supplies have been halted over an escalation of the Ukraine crisis into an armed conflict. But US efforts are a waste of time for the following reasons.

    1- The entire LNG exports from the United States, Qatar and Australia could hardly replace the almost 200 billion cubic metres (bcm) piped by Russia to the EU. Moreover, the bulk of Qatari, Australian and American LNG exports is already contracted for in the Asia-Pacific region. To this could also be added that the global LNG market is currently very tight with rising demand in Asia particularly China and that Russian piped gas is far cheaper than LNG.

    2- Europe has a limited LNG import capacity. This makes ramp-ups of LNG imports quite useless particularly if they are needed to replace Russia’s almost 40% share of the European gas market.

    3- Rising US domestic gas demand and declining production will cap US LNG production and exports if not reduce them.

    4- As long as EU sanctions against Russia over the Ukraine crisis don’t include gas supplies and Nord Stream 2 gas pipeline, Russia may not cut gas supplies to the EU.

    5- Russia isn’t dependent on the EU gas market for its gas exports. It could easily switch its entire gas exports to China, the world’s largest gas and LNG market.

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

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