Japan, EU to cooperate to ensure LNG supply, reduce reliance on Russian energy

Japan and the EU agreed on May 12 to cooperate and help each other's security of LNG supply, and work together to reduce Europe's dependency on Russian energy supply by ensuring diversification through necessary investments.

"In the light of sanctions on Russia, we will cooperate to keep global energy markets stable and help ensure each other's security of supply, in particular for the supply of LNG," Japan and the EU said in a joint statement following the summit meeting in Tokyo earlier in the day.

"We will cooperate to reduce Europe's dependency on energy supplies from Russia and to ensure diversification of energy supply sources, and acknowledge the need for investments to achieve this."

The latest move comes after Japan said Feb. 9 it would divert some surplus cargoes to Europe, where there were gas shortages, following requests from the EU and the US.

Japanese Minister of Economy, Trade and Industry Koichi Hagiuda said at the time that Japan was diverting a couple of destination-free LNG cargoes in February and would divert more LNG cargoes in March to Europe while ensuring stable domestic LNG supply.

Phasing out

The EU has pledged to phase out all Russian fossil fuel imports by 2027, with a total ban on Russian coal imports set to take effect in August this year. The EU has also proposed to phase out oil and oil product imports by the end of 2022, though some member states remain opposed to the embargo, including Hungary.

EU Council President Charles Michel has also said that measures on Russian gas imports would have to be taken "sooner or later" but given the EU's continued dependence on Russian gas, no sanctions have yet been proposed.

The European Commission in March said it would aim to reduce demand for Russian gas imports by two-thirds by the end of 2022 through increased LNG supplies, higher biomethane production and energy efficiency measures. Russia supplied 155 Bcm of gas and LNG to the EU in 2021, meeting around 40% of its demand.

Concerns over Russian gas flows to Europe have seen gas prices remain at sustained highs, with the TTF month-ahead price having hit a record Eur212.15/MWh ($221.95/MWh) on March 8, according to Platts assessments by S&P Global Commodity Insights.

The contract was last assessed May 11 at Eur94.90/MWh, still 280% higher year on year.

Japanese Prime Minister Fumio Kishida said May 9 that Japan will ban "in principle" Russian oil imports following the latest commitment by leaders of the G7.

G7 leaders agreed May 8 to phase out Russian energy, including oil, "in a timely and orderly fashion," while ensuring "stable and sustainable global energy supplies and affordable prices for consumers."

Tokyo's latest move comes a month after the government's decision April 8 to ban Russian coal imports in phases as part of an earlier commitment by G7 nations.