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Japan mulls impact of potential Russian LNG sanctions

  • : Natural gas
  • 22/02/23

Japan's LNG buyers are awaiting updates on whether exports of the fuel from Russia will be included in newly imposed sanctions on the country, suggesting that there could be long-term repercussions on Japan's LNG supply-demand situation even if any short-term impact resulting from such curbs will likely be minimal.

A recent rise in LNG inventories and expectations of milder weather in Japan in the coming weeks could limit the short-term impact of any potential halt in LNG supplies from Russia, industry participants said. But sustained curbs could create additional spot requirements from Japan in the following months and hurt future bilateral collaboration between the two countries, especially with several of Japan's term contracts having expired or due to expire, they added.

Japan's prime minister Fumio Kishida said on 23 February that the country will join the US and EU in imposing sanctions on Russia over the situation in Ukraine, including banning trades with the self-proclaimed Donetsk People's Republic (DNR) and Luhansk People's Republic (LNR) in eastern Ukraine, and suspending the issuance of new sovereign debt by the Russian government in Japan.

He did not mention if sanctions are being imposed on the energy sector, including LNG, but said that the "situation" will not have a huge impact on the country's energy supply. He also said that Japan will "promptly take further measures" if the situation worsens, without mentioning if LNG will be implicated.

"LNG is also in stock for a few weeks at electric power companies and gas companies," Kishida said in his only mention of LNG, as he spoke of the country's 240 days of crude oil reserves. "For this reason, we recognise that this situation will not immediately cause a major hindrance to the stable supply of energy," he continued.

Expectations on whether Japan's sanctions on Russia will be extended to LNG are mixed. "I don't think they will touch the energy sector… it will be a lose-lose situation for both countries," a Japanese buyer said.

But some expect the curbs to cover all sectors, including LNG. "Once they impose a sanction, it means they immediately want to stop trading with that country," a trading analyst said.

Japan imported a total of 6.57mn t of LNG from Russia in 2021, up from 6.14mn t a year earlier. Its Russian imports in 2021 accounted for around 8.8pc of its total LNG imports of 74.3mn t in the year.

It received 645,596t of LNG from Russia in December 2021, accounting for 9.2pc of its total LNG imports in the month. Russia was the country's fourth-largest LNG exporter in December, after Australia, Malaysia and Qatar.

"I am hoping LNG will remain outside of [the sanctions] if they don't want the population to pay," a trader said.

"End users [and the] general population will bear the brunt of energy inflation," he said, adding that high LNG prices have already trickled down to and impacted downstream customers.

Asian spot LNG prices have traded at high levels since September last year, largely fuelled by gains in European gas hub prices. The ANEA price, the Argus assessment for spot LNG deliveries to northeast Asia including Japan, for the front half-month averaged $30.504/mn Btu from 1 September last year to 22 February this year and hit a record high of $44.980/mn Btu on 22 December 2021. It was last assessed at $24.535/mn Btu on 22 February, nearly four times the $6.780/mn Btu assessed exactly a year earlier.

Japan's LNG inventories rise

Japan's LNG inventory levels have picked up slightly in recent weeks, after a fall in coal- and oil-fired generation capacity in end-January increased the call on gas for power generation and led to a dip in stock levels.

Japan's main power utilities held 1.82mn t of LNG as of 20 February, up by 2.2pc from 1.78mn t a week earlier and higher than 1.67mn t on 30 January, according to a weekly survey by the trade and industry ministry. But they were lower than 2.3mn t at the end of February last year.

LNG market participants generally echoed Kishida's views of ample inventories, but cautioned that any cold snap that occurs in the coming weeks would draw down inventories rapidly.

"I think Japanese buyers will be able to cope in the next 2-3 weeks [in the event of LNG sanctions] because inventories are okay," a Japanese trader said. But an unexpected cold snap could draw down inventories significantly. This is also "bearing in mind that Japan's storage capacity is not as huge as in China [or] Europe," a trader at a European firm said.

The Japan Meteorological Agency (JMA) is so far predicting generally warmer-than-usual weather in the country in the coming weeks. It forecast on 17 February a 50pc or high probability of above-normal temperatures throughout Japan from 26 February-4 March, and a 30-50pc likelihood of that from 5-18 March.

But Japanese LNG buyers may have to procure replacement cargoes from the spot market for deliveries further out if their long-term supplies from Russia are disrupted.

"Maybe there won't be so much impact on the prompt market since buyers already bought some spot cargoes, but it may affect their supply-demand balance for summer if they don't get term cargoes from Russia," a Japanese buyer said. The northern hemisphere summer season typically lasts from June-September.

Several Japanese buyers — including power utilities Kansai Electric, Chugoku Electric and Kyushu Electric — have bought March and April cargoes from the spot market in recent weeks, with the supplies sourced from various liquefaction plants, including those in Oman and Australia.

At least eight Japanese buyers have term offtakes from the 9.6mn t/yr Sakhalin LNG project in far east Russia. Major state-owned importer Jera has a contract to receive 1.5mn t/yr of LNG from the facility across 2009-29 on a fob basis, and a separate agreement to receive 500,000 t/yr from 2011-26 on a des basis.

Other Japanese firms including Hiroshima Gas, Osaka Gas, Saibu Gas, Toho Gas, Tokyo Gas, Kyushu Electric and Tohoku Electric have separate contracts to receive a total of at least 3mn t/yr of LNG from the project.

Future LNG collaboration may be in jeopardy

Sustained sanctions on LNG, if they are imposed, could hurt chances of further collaboration between the two countries, particularly at a time when several of Japan's contracts with other LNG suppliers have expired or are expiring and Russian liquefaction capacity is expanding, industry participants said.

The first 6.6mn t/yr train at the planned 19.8mn t/yr Novatek-led Arctic LNG 2 facility is expected to begin operations in 2023, with the second and third equally-sized trains expected to commence in 2024 and 2025, respectively. Novatek has so far signed long-term agreements with Chinese firms that include ENN, Zhejiang Energy Gas and Shenergy to supply LNG from Arctic 2, in addition to trading firms Vitol and Glencore, as well as Spain's Repsol, and may potentially be looking to ink more term deals, industry participants said.

State-owned importer Jera said last November that it would not renew its long-term LNG contracts totalling 5.5mn t/yr from Qatar that were due to expire the following month. Another Japanese buyer has an existing contract with Malaysian state-owned Petronas to buy LNG from the 30mn t/yr Bintulu LNG plant that will expire in March this year.

By Joey Chua


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25/04/11

US tariffs cast a shadow on global gas market

US tariffs cast a shadow on global gas market

Steel can make up nearly a third of an LNG terminal's pricetag, so the new levies could push up costs and push back start-up dates, writes Xiaoyi Deng London, 11 April (Argus) — US president Donald Trump's volatile tariff policy and some of the countermeasures already announced by large trade partners are unlikely to cause any direct disruption to global gas markets. But they will have a direct impact on future US liquefaction capacity. And the indirect effects on gas supply and demand could be huge, stemming from a weaker macroeconomic outlook, fuel substitution and inflationary pressures on infrastructure development. US LNG developers hailed Trump's return to office, after complaining that his predecessor complicated the issuance of additional export licences. But Trump's imposition of 25pc tariffs on all foreign-sourced steel and aluminum, from 12 March, will increase infrastructure costs in the US' upstream and midstream sectors. These present an immediate risk for US LNG developers, particularly for the five projects under construction and the six others expected to reach final investment decisions (FIDs) this year. Metals account for up to 30pc of the cost of an LNG export plant. A terminal can cost $5bn-25bn to build, depending on its size, with steel used for pipelines, tanks and other structural frameworks. Facilities can be built using some domestically produced metal, but higher prices for this might lead to construction and FID delays for the country's planned liquefaction projects. US tariffs' primary effect on the domestic gas market stems from duties levied on non-energy goods used by the oil and gas industry, including steel and specialised pipeline components such as valves and compressors, which are imported. The US remains a net natural gas importer from Canada , but these flows are unlikely to be affected by trade tariffs, given the lack of alternative supply sources available to some northern US states. Tariff baiting Trump's latest tariff round , unveiled on 2 April, involves a a minimum 10pc on all foreign imports from 5 April,with much higher tariffs on selected countries that briefly came into force on 9 April, before Trump bowed to panic in financial markets and announced a 90-day pause. China is the key exception. It has announced retaliatory tariffs that could disrupt US energy exports, resulting in an escalation that leaves the overall levy at 145pc in the US and 125pc in China. China had already stopped importing US LNG earlier this year. But disruption to trade between the world's two largest economies may weigh heavily on manufacturing activity in China, in turn reducing industrial gas demand. And the ripple effects of disruption to US LPG exports to China may alter fuel-switching economics in the region and beyond. Most other countries in Asia-Pacific have opted not to follow China's lead by retaliating. The Japanese government intends to negotiate a better tariff deal and is considering investing in the US' proposed 20mn t/yr Alaska LNG export project as part of wider efforts to reduce its trade surplus with the US. Countries in Asia-Pacific have been hit with some of the highest of Trump's targeted duties. The EU is keeping retaliatory measures on the table, but these are unlikely to involve US LNG. Europe has become much more reliant on LNG imports after losing the bulk of its Russian pipeline supply, and imposing tariffs on energy imports would only reignite inflationary pressures that European countries have tried to curb over the past three years. The bloc says it is ready to negotiate on possibly increasing its US LNG imports to reduce its trade surplus and would axe tariffs on industrial imports if the US agrees to do the same. But Trump says this is not enough, citing the EU's upcoming Carbon Border Adjustment Mechanism as one of the "unfair trade practices" that justifies a tariff response. US LNG project pipeline mn t/yr Project Capacity Expected start/FID Under construction Plaquemines 19.2 2025 Corpus Christi stage 3 12.0 2025 Golden Pass 18.1 2026 Rio Grande 17.6 2027 Port Arthur 13.5 2027 Waiting for final investment decision Delfin FLNG 1 13.2 mid-2025 Texas LNG 4.0 2025 Calcasieu Pass 2 28.0 mid-2025 Corpus Christi train 8-9 3.3 2025 Louisiana LNG 16.5 mid-2025 Cameron train 4 6.8 mid-2025 Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Q&A: IMO GHG scheme in EU ETS could be 'challenging'


25/04/11
25/04/11

Q&A: IMO GHG scheme in EU ETS could be 'challenging'

London, 11 April (Argus) — Delegates have approved the global greenhouse gas (GHG) pricing mechanism proposal at the International Maritime Organization's (IMO) 83rd Marine Environment Protection Committee (MEPC) meeting. Argus Media spoke to ministerial adviser and Finland's head representative at the IMO delegation talks, Anita Irmeli, on the sidelines of the London MEPC meeting. What is your initial reaction to the text? We are happy and satisfied about the content of the agreed text, so far. But we need to be careful. This week, all member states were able to vote. But in October, when adaption will take place, only those states which are parties to Marpol Annex VI will be able to vote if indeed a vote is called for, and that changes the situation a little bit. Here when we were voting, a minority was enough — 40 votes. But if or when we vote in October, then we need two thirds of those party to Marpol Annex VI to be in favour of the text. Will enthusiasm for the decision today remain by October? I'm pretty sure it will. But you never know what will happen between now and and the next six months. What is the effect of the decision on FuelEU Maritime and the EU ETS? Both FuelEU Maritime and the EU ETS have a review clause. This review clause states that if we are ambitious enough at the IMO, then the EU can review or amend the regulation. So of course, it is very important that we first consider if the approved Marpol amendments are ambitious enough to meet EU standards. Only after that evaluation, which won't be until well after October, can we consider these possible changes. Do you think the EU will be able to adopt these the text as it stands today? My personal view is that we can perhaps incorporate this text under FuelEU Maritime, but it may be more challenging for the EU ETS, where shipping is now included. What was the impact of US President Donald Trump's letter on the proceedings? EU states were not impacted, but it's difficult to say what the impact was on other states. By Madeleine Jenkins Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

IMO approves two-tier GHG pricing mechanism


25/04/11
25/04/11

IMO approves two-tier GHG pricing mechanism

London, 11 April (Argus) — Delegates have approved the global greenhouse gas (GHG) pricing mechanism proposal at the International Maritime Organization's (IMO) 83rd Marine Environment Protection Committee (MEPC) meeting, pending an adoption vote at the next MEPC in October. The proposal passed by a majority vote, with 63 nations in favor including EU states, the UK, China and India, and 16 members opposed, including Mideast Gulf states, Russia, and Venezuela. The US was absent from the MEPC 83 meeting, and 24 member states abstained. The proposal was accompanied by an amendment to implement the regulation, which was approved for circulation ahead of an anticipated adoption at the October MEPC. Approval was not unanimous, which is rare. If adoption is approved in October at a vote that will require a two-thirds majority, the maritime industry will become the first transport sector to implement internationally mandated targets to reduce GHG emissions. The text says ships must initially reduce their fuel intensity by a "base target" of 4pc in 2028 ( see table ) against 93.3 gCO2e/MJ, the latter representing the average GHG fuel intensity value of international shipping in 2008. This gradually tightens to 30pc by 2035. The text defines a "direct compliance target", that starts at 17pc for 2028 and grows to 43pc by 2035. The pricing mechanism establishes a levy for excessive emissions at $380 per tonne of CO2 equivalent (tCO2e) for ships compliant with the minimum 'base' target, called Tier 2. For ships in Tier 1 — those compliant with the base target but that still have emission levels higher than the direct compliance target — the price was set at $100/tCO2e. Over-compliant vessels will receive 'surplus units' equal to their positive compliance balance, expressed in tCO2e, valid for two years after emission. Ships then will be able to use the surplus units in the following reporting periods; transfer to other vessels as a credit; or voluntarily cancel as a mitigation contribution. IMO secretary general Arsenio Dominguez said while it would have been more preferable to have a unanimous outcome, this outcome is a good result nonetheless. "We work on consensus, not unanimity," he said. "We demonstrated that we will continue to work as an organization despite the concerns." Looking at the MEPC session in October, Dominguez said: "Different member states have different positions, and there is time for us to remain in the process and address those concerns, including those that were against and those that were expecting more." Dominguez said the regulation is set to come into force in 2027, with first revenues collected in 2028 of an estimated $11bn-13bn. Dominguez also said there is a clause within the regulation that ensures a review at least every five years. By Hussein Al-Khalisy, Natália Coelho, and Gabriel Tassi Lara IMO GHG reduction targets Year Base Target Direct Compliance Target 2028 4% 17% 2029 6% 19% 2030 8% 21% 2031 12% 25% 2032 17% 30% 2033 21% 34% 2034 26% 39% 2035 30% 43% Source: IMO Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Oil and gas lobby calls H2 'core competency,' hails 45v


25/04/10
25/04/10

Oil and gas lobby calls H2 'core competency,' hails 45v

Houston, 10 April (Argus) — The oil and gas industry views hydrogen production as a "core competency" and sees 45v tax credits driving US exports and innovation, according to the American Petroleum Institute (API). "We really see this, especially from the oil and gas perspective, as a core competency," said Rachel Fox, API director of policy and strategy, on a webinar Thursday hosted by ConservAmerica. "We have such an advantageous opportunity with this credit," said Fox. "When we're talking about the export opportunity, we really do hold the cards in terms of producing hydrogen at the lowest cost anywhere in the world." The 45V incentive has become a crucible in President Donald Trump's agenda to promote fossil fuels. A broad-based coalition of groups sometimes at odds with one another has coalesced in favor of 45V noting that it promotes manufacturing jobs across rural America and sets up US energy companies to dominate growing global demand for cleaner burning fuels. Nonetheless, ConservAmerica described such energy tax incentives as being "squarely in the crosshairs" as legislators gear up for budget negotiations in which the administration is looking to slash government spending to offset a promised corporate tax cut. By tying a tiered scale of incentives to carbon intensity, 45V has spurred oil and gas companies to develop technologies and practices that curb emissions, said Fox. "There's a lot of incentive to try to hit that $3 mark by getting your hydrogen produced at a really low carbon-intensity limit and so it's galvanized a ton of innovation and a ton of new ideas on how that can be done throughout the natural gas system," said Fox. Most of those ideas revolve around lowering the methane intensity of natural gas production or sourcing low-methane intensity natural gas, such as from biowaste, said Fox. Some environmental advocates are skeptical that emissions from natural-gas based hydrogen production can be driven low enough to qualify for the highest $3/kg tier with existing technology and that most oil and gas companies will instead have to use less lucrative 45Q credits that apply to carbon capture and storage technology (CCS). However, at least one major energy company, ExxonMobil, has said it is seeking 45V to advance its massive natural-gas based hydrogen and ammonia project in Baytown, Texas. By Jasmina Kelemen Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Norway plans to cut GHGs, but remain oil, gas producer


25/04/10
25/04/10

Norway plans to cut GHGs, but remain oil, gas producer

London, 10 April (Argus) — Norway's government has proposed a greenhouse gas (GHG) emissions reduction of a minimum 70-75pc by 2035, from a 1990 baseline, but has also committed to the country remaining "a stable and predictable supplier of oil and gas produced with low emissions". The government today set out plans for a 2035 GHG reduction target, as well as a wider climate plan for the country. The 2035 GHG reduction targets build on Norway's 2030 goal of "at least" a 55pc reduction in GHGs, again from 1990 levels. Norway has a legislated goal of "a low-emission society" by 2050 — GHG reductions of 90-95pc from the 1990 baseline. Norway's government underlined its commitment to Paris climate agreement goals and phasing out the use of fossil fuels "towards 2050", but also said that it would "not prepare a strategy for the end phase of Norwegian oil and gas". "The government's plan is about phasing out emissions, not industries", it said, noting that Norway is "a significant contributor to Europe's energy security". Norway is the largest producer and only net exporter of oil and gas in Europe. "The government will further develop the petroleum industry and facilitate the future provision of fields… production will continue to be efficient and with low emissions," the government said. It aims for the country's oil and gas sector — the country's highest-emitting industry — to bring emissions from production to net zero in 2050. The bulk of oil and gas emissions are from downstream use — known as scope 3. Norway plans to achieve the majority of its proposed 70-75pc GHG cuts through national measures, including reduced fossil fuel use and both technical and nature-based carbon removals. It also plans to purchase emissions reductions from outside the EU and European Economic Area. This refers to internationally transferred mitigation outcomes (ITMOs) — emission credits — under Article 6 of the Paris climate agreement. Norway's parliament will consider the proposals. Once legislated in the country's climate act, Norway plans to communicate its updated plans to the UN. Signatories to the Paris climate agreement are expected to submit updated climate plans — known as nationally determined contributions (NDCs) — to UN climate body the UNFCCC every five years. The deadline for NDCs setting out climate goals up to 2035 was in February, but many countries have yet to submit plans . By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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