Japan’s investment drive in LNG faces risk of souring: study

Japan’s investment drive in LNG faces risk of souring: study

Japan’s banks and public agencies have funnelled nearly $25 billion into liquefied natural gas (LNG) projects since 2017 but the investments may sour as prices plummet from the COVID-19 pandemic and as climate change risks rise, a new study shows.

Spurred on by the government to boost energy security since the 2011 Fukushima disaster shut down the country’s reactors, Japan’s investment in LNG rivals that for coal, the dirtiest fossil fuel, while more evidence is emerging of the high climate impacts from LNG and gas.

The backing of high-risk projects that require decades of sales to return investments looks questionable, with some facing the risk of delay or being scrapped, the study by Global Energy Monitor (GEM) released to Reuters showed.

“The original rationale for the program – enhanced energy security – appears now to be fundamentally flawed, as the simultaneous shocks of the COVID-19 pandemic and the 2020 oil price crash reveal the vulnerability of global LNG supply chains,” analysts Greig Aitken and Ted Nace wrote in the report.

Japan is the world’s biggest importer of LNG, with burning gas from LNG producing about 40% of the country’s electricity, though purchases are in long-term decline.

Competition from renewables and energy storage, which are growing cheaper, may also hit the investments, the report said.

GEM is a network of researchers focusing on fossil fuels and alternatives, the grouping says.

Japanese banks, public agencies and other entities have provided $23.4 billion of loans and support in 10 countries for more than 20 LNG terminals, tankers and pipelines, GEM said. Fourteen more LNG terminals in 11 countries are in line for Japanese financial support, the report said.


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