Bousso: The global push to energy security is highlighted by the tie-up between Japan and Qatar.

Qatar's long term deal to supply Japan’s largest power generator JERA with LNG highlights two themes in the hot market for this super-cooled fuel: the race for market share and global push for energy safety. QatarEnergy, Qatar's national gas and oil?company, signed a contract on Tuesday to supply JERA (Japan's largest generator of electricity) with 3 million tonnes per annum (mtpa), over a period of?27-years, beginning in 2028.

The deal will allow Qatar to keep up with its biggest competitor, the United States.

Qatar has several advantages over other LNG producers, such as lower production costs, and a closer proximity to Asia - the largest and fastest growing LNG market in the world.

The Gulf nation's exports to Japan have fallen from a high of 16,7 million tons in 2013, to around 3 million tons over the past few years, as Japanese demand has weakened and other exporters have increased their competition.

Qatar has been able to secure a number of major deals, including this new one that will double its LNG shipments. The country has also signed deals to supply Malaysia, France, and China, the world's biggest LNG importer. These agreements support Qatar's three massive expansion projects, which are expected to increase Qatar's LNG export capability from 77 million tons per annum today to 110 millions tons per annum later this year and 142,000,000 tons by 2030.

This explosive growth will help Qatar close the gap between it and the U.S. which, in 2023, became the top LNG exporter of the world. It is also expected to push its capacity above 200 million tons per year by 2030.

JAPAN’S UNCERTAINTY ABOUT ENERGY

The agreement represents a major shift in Japan's energy policy. The world's second largest LNG importer, Japan, was determined at the beginning of this decade to reduce its reliance on expensive gas and fossil fuel imports.

Japan's vulnerability to energy is structural. Japan, the world's 4th largest economy, has been reliant for decades on fossil fuel imports. It also had few domestic resources and no pipeline gas options.

In the 1960s, Japan began to import LNG. The fuel became an important part of the country's energy system. After the Fukushima nuclear disaster in 2011, which led to the shut down of many reactors, LNG consumption hit a record 90 million tons. It then declined steadily to 66 million tonnes in 2025, as efficiency improvements, renewables and coal restarts combined with a declining population eroded gas demand.

What explains Japan’s sudden U-turn in LNG policy? Security is the answer.

Tokyo has reassessed its energy supply due to the geopolitical turmoil of the last few years, primarily in Russia and the Middle East.

In Japan's seventh "strategic" energy plan published in February of last year, it was stated that due to international tensions and the uncertainty surrounding the deployment speed of renewable technologies, the country should be able to secure long-term LNG agreements regardless of any advances made in renewables.

According to the government plan, securing stable LNG supply is crucial for ensuring electricity supplies while reducing dependence on inefficient coal-fired plants. LNG-fired plants are branded as "a practical measure" during this transition.

The plan predicts that Japan's LNG demand in 2040 will range between 53 mtpa and 74 mtpa depending on the pace of adoption of other energy technologies.

The new strategy is a radical departure from Japan's earlier approach, which saw the utilities and traders of the country allow several long-term Qatari gas contracts to expire, much to the frustration of Doha, because?Japanese customers prioritized flexibility due to uncertain long-term demand for gas.

Qatar's LNG contract terms are rigid, with long-term durations and strict requirements for cargo delivery to specific ports. This means that buyers cannot sell fuels that exceed their actual demand. Most U.S. producers of LNG offer shorter-term contracts that allow for cargo destination flexibility.

Japan seems to prefer security over flexibility in a world that is more uncertain, even if global LNG supplies have increased rapidly.

The JERA/QatarEnergy agreement reflects the current tensions in the LNG markets: Net importers face uncertain energy futures while producers want to lock in customers for decades.

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(source: Reuters)