Japan’s largest electricity generating company JERA announced on September 11 that it will begin full-scale consideration of procuring LNG from a liquefied natural gas (LNG) project planned by U.S. energy company Glenfarn in Alaska. The purchase volume is expected to be over 1 million tonnes per year, under a 20-year long-term contract. Detailed information on the development status will be shared, and a final decision on whether to procure LNG will be made.
The Trump administration, which has made increasing fossil fuel production a key policy priority, is calling on Japan and other countries to participate in this project, and the possibility of a contract was also mentioned in a joint Japan-U.S. statement that included a USD 550 billion investment from Japan.
For Japan, Alaska LNG would strengthen energy security and have the advantage of being able to freely resell it to other companies according to demand. However, it has been pointed out that exporting it would require the construction of various infrastructure, which could result in higher purchase prices.
The Alaska LNG project is a project that U.S. President Trump has expressed interest in and has been one of the topics of Japan-U.S. tariff negotiations. Following the agreement, the Japanese and U.S. governments issued a joint statement stating, “We will pursue an offtake agreement for LNG in Alaska and make stable, long-term additional purchases of U.S. energy totaling USD 7 billion (approximately 1.3 trillion yen) per year.”
On the 10th, JERA signed a letter of intent (LOI) with Glenfarn, indicating its interest in procuring LNG. Based on the information obtained from Glenfarn, JERA will consider whether to actually procure LNG and decide whether to enter into a basic agreement to negotiate volume and price. The procurement is expected to be on an FOB (free on board) contract, allowing JERA to adjust the delivery date and decide whether to sell the gas to other companies.
The Alaska LNG project will transport natural gas produced in the north to the south via pipeline, approximately 1,300 kilometers away. The relatively short distance from the south to Japan offers the advantage of a stable LNG supply. Alaska’s annual production volume is planned to be 20 million tonnes, equivalent to 30 per cent of Japan’s total demand.
The Petroleum Authority of Thailand (PTT) and the Taiwanese state-owned China Petroleum Corporation (CPC) are currently in negotiations for procurement for this project. This marks the first time that a procurement contract has been made public for a Japanese company.
JERA handles approximately 36 million tonnes of LNG annually, with Australia accounting for roughly half of its procurement sources. Earlier this year, the company signed a contract for 5.5 million tonnes of U.S.-produced LNG annually, further diversifying its procurement sources.
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