LNG, the lifeline of daily life What should be done to ensure a stable supply? Jul 7 at 24:20

LNG = liquefied natural gas is indispensable for daily life as a fuel for thermal power generation and as a raw material for city gas. Russia's invasion of Ukraine caused prices to soar temporarily, causing electricity bills to soar in Japan and power outages in some Asian countries that could no longer procure them.

As concerns about stable supply continue, preparing for crises is a common challenge for all countries. Therefore, Japan, one of the world's leading LNG importers, has begun to create a framework for international cooperation for stable supply.
(Economic Affairs Department Reporter: Keisuke Igarashi)

LNG is the lifeblood of people's lives

In preparation for the severe summer heat, the government has been requesting power conservation within the service of TEPCO.

Thermal power generation accounts for more than 7% of the total power supply of Japan, and most of the fuel is LNG. Furthermore, Japan relies on almost all of its energy resources, such as crude oil and LNG, from foreign sources, and its energy self-sufficiency rate is only 13%. (2021, Agency for Natural Resources and Energy)

Even if we can normally use electricity and city gas without inconvenience, once prices rise or LNG procurement is interrupted, our lives are immediately threatened.

Why LNG is in contention

Russia's invasion of Ukraine in February last year made me realize that such a situation was not a problem.

European countries had been importing natural gas through pipelines from Russia, one of the world's leading resource-rich countries, but the invasion forced them to change their procurement sources, raising concerns about tight supply and demand.

The price of natural gas soared for a while, and the price of LNG, which was procured more as an alternative, also spilled over.

In particular, U.S. products are bringing about changes that can be called "tectonic shifts" in export destinations. According to the Japan Institute of Energy Economics, the share of U.S. LNG exports to Europe increased from 2021% in 29 to 2022% in 64.

On the other hand, exports to Asia have halved from 2021% in 47 to 2022% in 23. Moreover, there is no prospect of a significant increase in supply in the future.

Although LNG emits less polyoxygen dioxide during combustion than coal and oil, the global trend toward decarbonization is scrutinizing new investments.

Countries such as the United States and Qatar are shifting to increasing production and launching new production projects, but "it will take about three to four years at the earliest to actually increase production," according to a senior official of the Agency for Natural Resources and Energy.

International LNG Conference: Moving Japan for Stable Supply

Therefore, Japan began to work to create an international framework for stable supply.

On July 7, at an international conference in Tokyo that brought together the major LNG producing and consuming countries, he called for international cooperation led by the IEA = International Energy Agency.

Specifically, he proposed that the IEA grasp the status of suppliers and stockpiles in consumer countries and make recommendations to countries that are insufficiently prepared for crunches.

Furthermore, as a Japan, in the future, when supply and demand are tight, the IEA aims to ask countries with sufficient stockpiles for accommodation.

The IEA is an international organization established in the wake of the oil crisis of the 1970s, and there is already a framework for consuming countries to have stockpiles of oil to prevent supply disruptions and to release it in cooperation when necessary.

On the other hand, since such a global framework has not yet been established for LNG, Japan decided to aim to create a new framework centered on the IEA.

The Chair's Summary stated, "We look forward to continued discussions on policy response measures before the next IEA Ministerial Meeting," and discussions toward realization will proceed in each country.

Japan is aiming for an agreement at the IEA Ministerial Meeting in February next year.

Stable global supply Why Japan propose?

Behind Japan's proposal is the plight of emerging Asian countries.

When LNG prices soared temporarily due to Russia's invasion of Ukraine, procurement was disrupted in Bangladesh, Pakistan, India, and other countries, forcing the implementation of rolling blackouts.

Thailand and Indonesia have been forced to increase their purchases of cheaper coal as an alternative to LNG, and the negative impact on decarbonization is emerging.

The Japan, who chaired the G7 this year, took into account the situation of emerging countries and sent a message to the world called "Various Pathways 1."

Given the differences in energy situations between countries, he argued that countries should be given a variety of options on the path to decarbonization.

Behind the assertion is the desire to build strong cooperative relationships with Asian countries in the field of decarbonization and to disseminate technologies that are strengths of Japan, such as decarbonization of thermal power generation and ammonia co-firing, to Asia.

IEA Enhancements: LNG Stockpiling Challenges

On the other hand, there are some challenges that must be overcome in order to realize the framework proposed by Japan.

For example, LNG = liquefied natural gas is more difficult to stockpile than oil due to its nature. Since it is cooled to -162 degrees Celsius or less and liquefied, it vaporizes and the capacity decreases even when stored in a tank.

In general, it is said that if it is stored in a tank for one year, the capacity will be zero, so it cannot be stockpiled using tanks like crude oil.

In the United States and some European countries, LNG can be stored for a long time by injecting LNG into underground gas fields, but until now it has often been used for business purposes rather than stockpiling.

It has been pointed out that LNG is procured and stored when it is low, and when it becomes high, it is used in the form of selling inventory, and it does not function as an emergency stockpile.

Can we get support for "strategically surplus LNG"?

Under these circumstances, Japan has established a new mechanism called "strategically surplus LNG" to prepare for a tight supply and demand.

It is assumed that the government will provide financial support to private companies to procure LNG, including surplus, and utilize it in times of crisis.

The Japan hopes that countries will cooperate and have reserves in various ways to stabilize prices in the market as a whole and alleviate the tight supply-demand situation.

The European Commission, the executive body of the EU = European Union, is also showing a willingness to cooperate with Japan's proposal.

The day before the international conference on LNG in July, representatives from the Agency for Natural Resources and Energy and the deputy unit heads of the European Commission met and exchanged views.

Maciej
Chishevsky, International Negotiator, European Commission: "Europe has an abundance of underground storage, and other countries are trying to make the sourcing of LNG more flexible in a different way. The stable supply of the world depends on cooperation. I would like to discuss with Japan, the European Commission, and other countries to create a mechanism for stable supply."

International cooperation tested for stable LNG supply

Russia's invasion of Ukraine has divided the international community and rewritten the world map of LNG procurement in the energy sector.

While Europe is reconsidering its dependence on Russian natural gas, China is increasing its purchases from Russia.

In addition, as Europe has increased its LNG procurement, the strain has spread to emerging countries, and the fragmentation of the world has become a barrier to stable supply.

A representative from the Agency for Natural Resources and Energy hopes that "if this proposal becomes effective, it will be a major step toward repairing the division in the world over LNG."

Until 2050, when we aim to realize a decarbonized society, LNG is positioned as an important energy source to support the transition period.

Without a foundation for a stable supply of LNG, it will be difficult for the world to transition to a variety of clean energies, including renewable energy.

This year marks the 50th anniversary of the oil crisis.

In preparation for the energy crisis, cooperation among the international community is being tested to see if a new framework can be realized for LNG.

Keisuke Igarashi, Reporter of the Economic DepartmentJoined
the Yokohama Bureau,
Akita Bureau, and Sapporo Bureau in 2012After working in the Economic DepartmentCurrently
in charge of the
energy industry