Some of Japan’s largest LNG players are voicing concern about the timeline of FERC’s authorization decision on Venture Global Inc.’s Calcasieu Pass 2 (CP2) LNG project as they try to balance the country’s long-term natural gas supply outlook.
The CEOs of Inpex Corp. and Jera. Co. Inc. have penned letters to the Federal Energy Regulatory Commission and Chairman Willie Phillips asking the agency to “make a timely decision” on the 24 million metric ton/year (mmty) capacity liquefied natural gas project planned for western Louisiana.
Jera, Japan’s largest power utility and one of the world's largest LNG buyers, signed a sales and purchase agreement (SPA) earlier in the year for 1 mmty from CP2 for 20 years on a free-on-board basis. Inpex, another LNG heavyweight with equity in several large-scale LNG terminals in Asia Pacific, also holds a 20-year, 1 mmty SPA with Venture Global.
Jera CEO Hisahide Okuda said the volumes purchased from CP2 are a vital part of the company’s plans to continue balancing gas supply and supporting Japan’s energy security.
“However, the slowing of U.S government authorizations for new U.S. LNG export facilities is concerning,” Okuda said. “Jera would like to emphasize that it is of great importance and urgency that CP2 LNG receives the necessary approvals to commence construction.”
Okuda added that CP2 has also been recognized by Japan’s Ministry of Economy, Trade and Industry as an important “stable supply of energy” for the country.
In his letter to FERC, Inpex CEO Takayuki Ueda said the company was looking for Venture Global to be able to begin construction on CP2 early next year so it can begin receiving cargoes at its Japanese import terminal and for other gas customers by 2026.
FERC’s next open meeting is Dec. 19, 2023.
The United States has grown in importance as a steady supplier of LNG to Japan since U.S. exports began in 2016. As Japan has worked to diversify its long-term contracts, major LNG buyers have added U.S. producers to its portfolio of mostly Middle East and Australian volumes.
Japanese imports of U.S. gas have grown exponentially every year since 2016, with the exception of last year, when the majority of U.S. cargoes shifted to Europe. Japanese imports of U.S. LNG reached a high point in 2021, with more than 7 million metric tons (Mt) landing in the country, according to data from Kpler. More than 3 Mt of those volumes were purchased by Jera.
After last year’s dip, Japanese imports of U.S. LNG have recovered as global prices also have subsided. U.S. LNG producers are on track to send around 5.67 Mt to Japan by the end of the year, compared with 4.12 Mt last year.
While Japan and another major Asian buyer of U.S. gas, South Korea, have kept their LNG storage facilities near capacity for most of the year, the Energy Information Administration (EIA) recently reported that both countries are still vulnerable to demand for short-term cargoes.
Japan has the world’s largest above-ground storage capacity at around 425 Bcf, according to data from the International Group of Liquefied Natural Gas Importers. South Korea is in second place with around 298 Bcf of storage.
Thanks to relatively mild weather last winter and a steady stream of imports under long-term contracts, both countries kept storage levels at or near record highs for most of the year, according to the EIA.
However, without access to large underground storage facilities, both countries consider their above-ground storage an emergency buffer that could keep the country supplied for only a few weeks until more imports arrive.
“Lack of underground natural gas storage capacity and international pipeline interconnections highlights Japan’s and South Korea’s dependence on real-time LNG shipments,” EIA researchers wrote.
