Japan to Divert LNG to Europe as Backup for Russian Supply

Responding to requests from the US and EU, Japan has pledged to divert some liquefied natural gas (LNG) originally meant for Japan to Europe instead, seeking to provide alternative supplies for Western Europe in the event conflict with Russia disrupts supplies.

The extra shipments are expected to arrive next month, Japan’s Minister of Economy, Trade and Industry Koichi Hagiuda told reporters.

“We have decided to respond to requests from the United States and EU for sending LNG to Europe, where gas supply is tight,” Hagiuda said after separately meeting with the US and EU ambassadors to Japan earlier in the day, emphasizing meeting local demand would come first.

The government also asked Japanese companies with flexible LNG supplies not under long-term contract with a destination clause to divert as much as possible to Europe. Destination clauses mandate where a cargo can be delivered and limit buyers from reselling excess gas.

Move signals alignment with the West over Russia

The rare move by resource-poor Japan also underlines its intention to show the country is aligned with the West.

“In the context of the international developments over Ukraine, we need to work with the G7 countries, especially with comrade countries who share our values,” Hagiuda said, adding that the US and EU quickly helped Japan with LNG supplies in 2011 when an earthquake and tsunami took the Fukushima nuclear plant offline, compelling Japan to ramp up LNG imports.

Still, Japan’s contribution is likely to be limited.

Japan’s biggest oil and gas explorer Inpex Corp will try to respond to the government request but it will not be easy as most of its LNG production is linked with long-term contracts, its CEO Takayuki Ueda said.

Kazunori Kasai, CEO of the trading arm of JERA, Japan’s biggest power generator and one of the world’s biggest LNG importers, also said last week that Japanese utilities would have little spare supply.

Reuters, with additional reporting by Neal McGrath

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Neal McGrath

Neal McGrath is a New York-based financial journalist. Neal started his career covering the Asia-Pacific region for the Economist Intelligence Unit, then joined Asian Business magazine. He's subsequently held a variety of editorial positions covering business, economics, finance and sustainability. Neal has lived and worked in Hong Kong, Singapore, Germany and the US.