US pause on LNG export permits may impact new LNG supply for Japan: METI minister

The US pause on LNG export permits could impact new LNG supply for Japan, with Tokyo intending to lobby against Washington's move as necessary to safeguard the country's long-term supply, Minister of Economy, Trade and Industry Ken Saito said Jan. 30.

"Japanese companies have offtake contracts for prospective LNG production in the US upon securing approvals," Saito told a press conference in Tokyo. "Therefore, we are concerned that this temporary suspension of issuing export permits would delay the start of new LNG production."

"From this perspective, we will scrutinize the mid-to-long term impact from this matter, and we intend to lobby as necessary to prevent [the move] not interfering our country's stable energy supply."

Saito's remarks came after the Biden administration said Jan. 26 it will "pause" issuing key LNG export permits until the US Department of Energy can update how it considers the impacts of new terminals on the economy, climate change and national security.

A Japanese government official told S&P Global Commodity Insights Jan. 29 that Japan will clarify the Biden administration's decision to "pause" issuing key US LNG export permits and scrutinize impact on projects including the CP2 LNG project, in which Japanese companies have offtake agreements.

The review centers on the criteria the DOE considers in deciding whether to permit projects to export LNG to countries that lack free trade agreements with the US. Such countries make up most of the global LNG import market, making the receipt of the non-FTA export permits a critical step for major US LNG export projects to get commercially sanctioned.

Pending non-FTA LNG export applications at the DOE include the Venture Global CP2 LNG project, of which Japan's JERA and INPEX each have sales and purchase agreements to lift 1 million mt/year of LNG for 20 years.

Greater impact

"The US has been saying it is a reliable LNG supply source; however, we will need to keep a careful watch from now on following the temporary suspension of LNG export permits," said Hiroshi Hashimoto, senior fellow at the energy security unit of the Institute of Energy Economics, Japan.

"The suspended export permits would not only impact INPEX and JERA, which have sales and purchase agreements with the CP2 project, but also potentially impact Kyushu Electric's procurements as it covers the Lake Charles [project]," Hashimoto said.

"The [affected] volume could still be limited but it will have long-term impact, and Japanese companies will be cautious about lifting from US LNG projects," he added.

Similarly, a JERA spokesperson said Jan. 30 that the US move could turn out to be a concern for the global energy security.

"With the US expected to be one of the major LNG suppliers, the US pause on new export permits could turn out to be a concern for the world's energy security," the JERA spokesperson said.

"We see realization of CP2 and other new US LNG projects as important for Japan and the world's stable supply," the spokesperson said. "We will work in concert with the [Japanese] government while closely monitoring the US government move."

In October, Kyushu Electric emerged as a potential buyer in talks over a long-term LNG contract tied to Energy Transfer's proposed Lake Charles export project in Louisiana, according to a recent filing at the DOE.

Kyushu Electric President and CEO Kazuhiro Ikebe disclosed the talks in a letter dated Oct. 24 to the DOE that said the Japanese utility was also considering an equity investment in the project. Ikebe said in the letter that the long-term LNG purchases and the equity investment would have the backing of METI should the export of LNG to Japan be approved and Energy Transfer reach a final investment decision on Lake Charles.

The letter from the top Kyushu executive was among dozens submitted to the DOE in support of Energy Transfer's application for a new export license for Lake Charles that had been submitted to the agency and published online as of Oct. 30. Energy Transfer submitted the application in August, after the DOE in April rejected the developer's request for a three-year extension to bring the 16.5 million mt/year project online.

A Kyushu Electric spokesperson confirmed that the Fukuoka-based power utility is considering lifting LNG from, as well as an equity investment in, the Lake Charles project, as well as other new US LNG projects.