Japan will ensure its own energy demands are met before helping Europe with liquefied natural gas (LNG) shipments in the event of a dispute over Ukraine, according to the country’s trade minister.
The comments come amid fears European allies could run out of steam if Russia invades Ukraine, an attack that Russian President Vladimir Putin has repeatedly denied he was planning. The Biden administration and European governments have reached out to Japan, along with other countries in Asia, to divert gas shipments to Europe, Bloomberg reported Thursday.
“Japan is an energy importer and we are short of resources,” Commerce Minister Koichi Hagiuda said at a Friday press conference in Tokyo. “A very cold winter is expected this year, so we need to make sure our own energy needs are met. Japan will then consider what it can do to contribute to the international community.
Geopolitical tensions around Ukraine are another thorn in the side of Europe, which has been grappling with a fuel supply crisis for months. LNG spot prices have hit a record high in recent months, with utilities in Asia and Europe vying for the same supply of super-chilled fuel from exporters ranging from the United States to Nigeria.
Japan’s Hagiuda declined to comment directly on diplomatic talks between Japan and the United States. Hagiuda said the best option is to avoid a situation where fuel diversion is necessary, and he hopes countries will make efforts to find a diplomatic solution.
Unlike oil, Japan does not have a national stockpile of natural gas, Chief Cabinet Secretary Hirokazu Matsuno said on Friday, adding that the government was aware that national electricity and gas companies had about two to three weeks of stock.
However, Japanese importers have already sold spare parts to Europe in recent months due to more attractive prices in the Atlantic. The companies filled up with LNG before the winter to avoid a possible shortage and were able to unload some deliveries.
However, with inventories now reduced, Japanese power generators and gas distributors will likely need to keep most of their LNG under contract for the next few months to prepare for the summer. This will limit the amount of fuel they can send to Europe.
Diverting supply to Europe is “not an impossible task, but it will impact Japan’s power generation – and there’s not much wiggle room at the moment,” he said. Kazunori Kasai, managing director of Jera Global Markets Pte., the unit responsible for fuel supply. for the first Japanese electricity producer Jera Co.