Japan companies to invest $10 bil to expand Asian LNG market: minister
Tokyo Japanese companies will commit $10 billion to finance LNG projects in Asia to support the growth of the regional market, Minister of Economy, Trade and Industry Sugawara Isshu said Thursday.The investments will be made by both public- and private-sector companies and will span upstream, midstream and downstream LNG projects, the minister said at the LNG Producer-Consumer Conference 2019 in Tokyo. The $10 billion worth of investment follows $10 billion previously committed by the Japanese government two years ago. It comes at a time when oil majors are shifting their business models to become natural gas companies, and Asia is driving much of the LNG demand growth.
Japan would continue to lead the further development of the LNG market and be the springboard for boosting regional energy security through financing and capacity building in the Asian LNG sector going forward, Isshu said.
Geopolitical uncertainty and its impact on Asia’s energy security was a major topic of discussion among industry executives. Japan relies on LNG imports for its entire natural gas supply, and LNG is becoming a bigger contributor to Asia’s overall energy mix.
With much of the growth in Asian LNG demand coming from developing regions such as Southeast and South Asia, project funding from traditional sources such as banks is tough due to credit issues. Over the years Japanese energy companies have filled the gap.
For example, Philippines Secretary of Energy Alfonso Cusi told the conference that a consortium of Japan’s Tokyo Gas and domestic power utility First Corp. had broken ground on the country’s first LNG import terminal that will replace gas supply from its depleting Malampaya gas field.
The additional $10 billion of funding would come from institutions such as state-owned Japan Oil, Gas and Metals National Corp, Japan Bank for International Cooperation, Nippon Export and Investment Insurance as well as from Japanese commercial financial institutions, METI’s director of the oil and natural gas division, Masato Sasaki, told reporters.
The $10-billion fund, however, would only apply to projects in which Japanese companies were already participating, and this would be a pre-condition for financial support from state-owned entities such as Jogmec and JBIC, Sasaki added.
When asked if the funding for LNG projects is Japan’s answer to China’s Belt & Road Initiative, a state-sponsored infrastructure program, Sasaki said, “No.” He also said commercial feasibility would remain important for the investments.
Asia’s LNG demand growth has been hampered by the lack of midstream infrastructure development and downstream demand investment in the power sector, resulting in a much faster supply growth that has pressured LNG prices.
Some regional companies have been working to address this, but there is still need for investment in LNG regasification plants, pipeline networks and gas-fired power generation.
For example, Malaysia’s Petronas is refocusing investments on downstream growth ranging from LNG bunkering to electricity demand, its chief executive Tan Sri Wan Zulkiflee bin Wan Ariffin, told the conference.
Global energy consumption grew by 2.3% last year, the fastest this decade, with natural gas accounting for almost half of incremental energy demand, Executive Director of International Energy Agency Fatih Birol said at the conference.
Birol said fast growing Asian economies — led by China — and Europe would account for almost all of the increase in LNG imports up until 2024, and Australia, Qatar and the US will account for 60% of total LNG supply by 2024, with the US contributing two thirds of LNG export growth through the period of the forecast.