Japan Utility JERA Deepens US LNG Ties with Four Deals in Two Weeks

JERA, Japan’s biggest electric utility, has made a large and public purchase of U.S. LNG, securing up to 5.5 million tonnes per annum (mtpa) of LNG with four 20-year contracts. Delivery would begin in 2030.

The deals, announced June 11, would double the amount of LNG the U.S. currently ships to Japan.

JERA announced a non-binding agreement for 1.5 mtpa from Sempra’s Port Arthur LNG Phase 2 project and a purchase agreement with the Commonwealth LNG project for 1.0 mtpa.

JERA and the Trump administration celebrated the announcement, holding a ceremony at the Department of the Interior building with Interior Secretary Doug Burgum and Energy Secretary Chris Wright.

The event also included representatives of NextDecade’s Rio Grande LNG project and Cheniere, which signed agreements for 3.0 mtpa with JERA over the past two weeks.

JERA CEO Yukio Kani said that the primary reason for the purchases is to beef up and differentiate the country’s LNG supplies. Several analysts noted that the event staging was important to Japan and the U.S. administration.

“I think a big part of the way the announcement was made—aggregating these deals—was to demonstrate Japan's seriousness in addressing the Trump administration's concerns about trade,” Jason Feer, global head of business intelligence at Poten & Partners, told Hart Energy. “U.S., European and Asian government officials and industry executives have all suggested that increased imports of U.S. energy supplies would be a good way to address the U.S. concerns about trade imbalances.” 

The size of the deal is also significant for the U.S. LNG sector. JERA’s agreements support several projects that are working toward final investment decisions.

At the event, Wright and Burgum spoke about White House support for a developing LNG sector.

“America is no longer begging for foreign energy¾we’re producing it cleaner, smarter, better and more reliably than the rest of the world,” Burgum said.

While the Trump administration focuses on the benefit to the U.S., Feer said the deal makes sense for Japan. The country, one of the pioneers in the LNG industry, already has a robust regasification infrastructure and, like the U.S., faces growing electrical demands for artificial intelligence and electrification.

Australia is the leading supplier of Japan’s LNG, followed by Malaysia and Russia, according to a report from Nippon.com. The U.S. supplied the least, 5.8 mtpa, or about 9% of Japan’s supply.

“Japan has a huge global portfolio of long-term contracts, the vast majority of which are not U.S.-based,” Feer said. JERA’s move is major indicator that Japanese companies are willing to buy more LNG from the growing U.S. sector.

JERA’s deepening ties to U.S. natural gas is also consistent with Japan’s overall industrial strategy. The nation prefers to avoid overdependence on one source, such as Australia, for its supply and prefers to diversify when possible.

“As U.S. LNG output increases, it makes sense that Japan would increase purchases of U.S. LNG and other energy products,” Feer said. “The fact that U.S. LNG is competitively priced and offers flexible terms that would enable Japanese buyers to resell cargoes they don't need or sell them into higher-priced markets is a significant benefit as well.”