Reuters reported that as Japan's long-term contracts to import liquefied natural gas (LNG) from Russia's Sakhalin-2 project are set to expire, competing manufacturers are taking advantage of the opportunity to fill the supply gap for Tokyo. Industry experts say that in the context of Japan moving towards cleaner energy, demand for LNG from Russia has also decreased.
Japan is currently the world's second largest LNG importer, dependent on Russia for about 9% of its LNG consumption, equivalent to 6 million tons per year. Of these, 5 million tons were provided from long-term contracts with Sakhalin-2, a project controlled by Russian oil giant Gazprom.
Sakhalin-2's strength is its favorable geographical location, just a few days away from Japan for sea transportation, compared to more than a week from countries such as Australia, Canada or the US.
However, geopolitical pressure from Western allies and a strategy to reduce dependence on Russian energy have forced Japan to consider extending contracts with Sakhalin-2.
In addition, with stagnant electricity demand and a strategy to increase renewable energy, Tokyo plans to reduce the share of LNG in power generation from 33% last year to 20% by 2030.
Japan's long-term contracts with Sakhalin-2 will expire between 2026 and 2033, starting with an annual supply deal of 0.5 million tons from leading power producer JERA.
After Russia launched a military campaign in Ukraine in 2022 and faced sanctions, Japan has increased LNG imports from allies such as the US, Australia, Malaysia and Oman to secure long-term contracts.
Russia's LNG rivals from Alaska (US) and Canada are planning to supply LNG to Japan, with new projects coming close to the expiration of Sakhalin-2 contracts.
US Sen. Dan Sullivan of Alaska has visited Japan and South Korea four times over the past two years to introduce the (not yet developed) Alaska LNG project to Asian buyers. In August, Sullivan met with Japanese government officials including then-Prime Minister Fumio Kishida.
"This remarkable resource is a strategic asset, not only for the United States and Alaska, but also for our allies in Asia. It will help us a lot in helping our allies in Japan and South Korea get off Russian gas," he told Reuters.
Meanwhile, President-elect Donald Trump is preparing to approve export licenses for new LNG projects, which were halted under the administration of President Joe Biden.
