INTERVIEW: Mitsubishi to boost LNG output and trading to 20 mil mt/year in 2030: Group CEO

Japan's Mitsubishi Corp. sees its LNG business playing a pivotal role as energy transition gathers pace, and expects to boost its LNG production and trading volume to 20 million mt/year in 2030 amid anticipated demand growth in Asia, Jun Nishizawa, Group CEO of Natural Gas Group, told S&P Global Platts.

With Japan entering the peak winter power and gas demand season, Mitsubishi is vigilant about ensuring LNG supply as Japan's largest LNG supplier after the country grappled with a tightened power supply-demand balance last winter, Nishizawa said in a written interview with Platts.

"Without additionally seeing unexpected incremental demand and outage of major power sources hereafter, it is anticipated to have a low probability of tightening the supply and demand," Nishizawa said.

"We are humbly serving to ensure stable LNG supply by not relaxing our guard and [will] continuously be in close coordination with our customers," he added.

Mitsubishi, among the 10 biggest private sector LNG suppliers globally with 12 million mt/year of equity production capacity, is also urging operators of the projects it has equity stakes in to ensure stable output and supply, he said.

Mitsubishi has equity stakes in LNG projects in Australia, Brunei, Indonesia, Malaysia, Oman, Russia and the US that produced a total 92 million mt of LNG in 2020, accounting for 25% of global output of 366 million mt in the year. These projects also supplied 43 million mt or 57% of Japan's total LNG imports of 74 million mt in the year.

Japan's power supply-demand balance tightened last January when the country experienced a surge in power demand that forced local power utilities to restrict gas-fired power generation due to low LNG stocks.

This was exacerbated by glitches at coal-fired power plants, low hydropower generation due to droughts, fluctuations in solar power output due to weather conditions, reduced oil-fired power generation capacity, and low nuclear power output.

Boosting LNG

In Asia, high spot LNG prices have been supported in recent months by regional demand and supply concerns for the Northeast Asia winter, coupled with high European gas prices due to winter supply concerns amid very low storage levels and lower-than-expected pipeline gas imports from Russia.

"For the next few years, there is a possibility of continuing the tight [LNG] supply and demand environment," said Nishizawa, attributing expected delays in plant construction to the pandemic and security factors, as well as potentially delaying and putting off final investment decisions for new LNG and gas fields developments amid increased decarbonization pressure.

In the face of current high spot LNG prices, asked whether Japanese LNG importers might reduce spot procurements and pursue various forms of term contracts, Nishizawa said that a balanced ratio of long-term and spot contracts was important for stable and flexible procurement.

"In order to maintain stable LNG supply, continuous investments for new LNG projects are essential, and term contracts will continuously be important for guaranteeing a return in this kind of investment," he said.

"In addition, we perceive that securing equity LNG from investing in the LNG supply source and forming a risk resilient portfolio from diversifying supply country and region will contribute stable LNG supply."

Mitsubishi, which participates in the Cameron LNG and LNG Canada projects, sees North America as a highly flexible supply source for both Europe and Asia with relatively low country risk, he added.

Japan has set an LNG handling volume target of 100 million mt for fiscal year 2030-31 (April-March), which was incorporated into the latest Strategic Energy Plan approved by the cabinet in October. The LNG handling volume comprises both import and trading volumes.

Asked about Mitsubishi's FY 2030-31 LNG handling volumes, Nishizawa said the company intends to cultivate its LNG demand in emerging economies in Asia by leading their energy transition to cleaner LNG from oil and coal to meet the needs of economic growth while addressing environmental issues.

"We expect our LNG equity production capacity and third-party LNG lifting volumes to be about 20 million mt in 2030," Nishizawa added.

Mitsubishi expects its LNG equity production capacity to be about 15 million mt/year in the mid-2020s due mainly to an addition of 0.38 million mt/year from the Tangguh Train 3 in Indonesia and 2.1 million mt/year from LNG Canada, which are both under construction. It does not disclose its LNG trading volumes.

Producing hydrogen

The company sees LNG as among the key pillars in energy transformation (EX) in its 2050 carbon neutrality roadmap announced in October, under which it has earmarked Yen 2 trillion ($17.6 billion) for investment in its EX initiatives by FY 2030-31.

"LNG is energy with relatively low environmental loads, is expected to be utilized in a wide range of fields including as a heat source, a balancing source for renewable intermittency and as a feedstock for next-generation fuels," Nishizawa said.

"As various countries in Asia transition to the carbon-neutral society, we believe [LNG] is one of important sources of energy," he said, adding that the company intends to maintain LNG-related investments to contribute stable supply to Japan and other Asian countries.

In order to minimize the carbon footprint from LNG, Mitsubishi is embarking on reducing the carbon footprint from existing LNG businesses; utilizing carbon capture and utilization (CCU) such as methanation and carbon capture and storage (CCS), and developing carbon management businesses, Nishizawa said.

Among the focus areas, Mitsubishi is looking at producing hydrogen from LNG, a method it sees has a cost advantage from using existing LNG infrastructure, compared with transporting hydrogen from abroad, which still has "high technological and cost hurdles," he said.

"Specifically we currently have a concept of using regasified natural gas from imported LNG in Japan as feedstock to produce hydrogen by utilizing unoccupied hydrogen production capacity at refinery," Nishizawa said.

Mitsubishi also considers liquefying CO2 and sending it to LNG producing countries for CCS, as well as weighing a framework to offset CO2 emissions from using carbon credits by jointly considering such concepts with companies involved, he added.