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Japan To Step Up Investment In LNG

Japan will increase investments in the production of liquefied natural gas abroad to secure supply, the country's industry minister said today.

"Russia's invasion of Ukraine has intensified competition for purchasing LNG, raising concerns about stable supply of the fuel for Japan," Koichi Hagiuda told media, as quoted by Reuters.

"The government needs to come to the forefront to secure LNG through cooperation with the private sector," the top official added.

Hagiuda also noted that global investment in liquefied natural gas production had declined amid efforts to decarbonize economies even though demand, especially in Asia, was on the increase.

While its demand for LNG grows, however, Asia has witnessed increased competition for the commodity from Europe amid the energy crunch and uncertainty about future supplies amid the growing alienation between the EU and Russia over Ukraine.

The latest developments pushed LNG prices even higher, dampening Asian demand for the superchilled fuel.

Europe is now the top destination of record-high U.S. LNG exports, while price-sensitive developing economies in the Asia Pacific are steering clear of the spot market and switching to coal and oil products as the price of LNG is unsustainable for them.

Japan, meanwhile, remains one of the top destinations for Russian liquefied natural gas. The country has stakes in two projects there, Sakhalin-1 and Sakhalin-2, and has said it had no intention of following Western supermajors and ending its presence in Russian energy.

These projects "are essentially important for energy security because the projects allow Japan to procure supplies below the market price, especially amid current high energy prices," Hagiuda said earlier this week, as quoted by Natural Gas Intelligence.

Nikkei Asia reported this month that if Japan exits Sakhalin-2, it could end up paying some 33 percent more for LNG imports annually. Japan is the biggest LNG importer globally in terms of capacity, with over 227 million tons annually.

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By Charles Kennedy for Oilprice.com

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