Japan to Import Canadian LNG in Bid to Diversify Energy Supply

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Amid rising geopolitical tensions, especially in the Middle East, Japan has received some welcome news on the energy front. Mitsubishi Corporation is preparing to begin importing liquefied natural gas (LNG) from Canada. These shipments will be primarily destined for the Japanese market.

This will be the first major delivery of Canadian LNG to Japan, which currently depends on Australia and Malaysia for over half of its LNG imports.

With limited domestic energy resources, Japan has been actively working to diversify its LNG supply. Australia, its largest supplier, is projected to face production declines in the coming years. This highlights the need for more stable and reliable sources. Canadian LNG, backed by geographic proximity and political stability, presents a strong alternative. It could play a key role in strengthening Japan's energy security.

Diversifying Japan's LNG Supply

LNG is natural gas that has been cooled to a liquid state, reducing its volume to about one-600th and making it much easier to transport by sea.

Japan does produce some natural gas domestically, mainly in areas like Niigata and Chiba, but this supply falls far short of meeting national demand. Like oil, Japan relies almost entirely on imports for its natural gas.

With delays in restarting nuclear power plants, Japan remains heavily dependent on thermal power, which generates around 70% of the country's electricity. Gas-fired power plants are the largest contributors.

Compared to other fossil fuels, natural gas produces less CO₂, making it a relatively cleaner option. Because of its key role in electricity generation, any disruption in LNG supply could have serious consequences for the economy and daily life. In fiscal 2024, Japan imported 65.87 million tons of LNG, making it the world's second-largest importer after China.

*A tanker carrying LNG docking at a pier. (File photo)*

The LNG Canada Project

The new LNG supply will come from the LNG Canada project in British Columbia, a facility developed with investment from Mitsubishi Corporation, Shell, and other partners. Natural gas is extracted inland and transported via a 670-kilometer pipeline to the coast. There, it is liquefied and shipped overseas by tanker.

The project represents a total investment of about $14 billion USD and has an annual production capacity of 14 million tons. Mitsubishi holds a 15% stake, giving it rights to around 2.1 million tons per year. If all of that were exported to Japan, it would cover roughly a quarter of the country's projected increase in LNG demand.

Mitsubishi's LNG Expertise

Mitsubishi was the first major Japanese trading company to enter the LNG business, beginning in the 1960s. Today, it is involved in LNG projects across more than 10 countries. With the addition of Canadian supply, Mitsubishi's annual LNG production capacity has grown to around 15 million tons, the largest among Japanese companies.

Katsumi Saito, Senior Executive Officer overseeing the fuel business and related operations, commented, "Our strength lies in the knowledge and development capabilities built on more than 50 years of experience."

One of the key advantages of Canadian LNG is proximity. Shipping LNG from Canada's west coast to Japan takes about 10 days — much shorter than the roughly 30 days required from the US Gulf Coast via the Panama Canal. That route can take even longer when canal traffic is restricted by drought.

Avoiding Chokepoints and Longer Routes

Other shipping routes, such as around the Cape of Good Hope in South Africa, can take up to 60 days. LNG from the Middle East typically takes about 16 days. In contrast, Canadian LNG avoids major chokepoints like the Strait of Hormuz, offering more stable and reliable delivery.

Canada also has vast natural gas reserves — enough to meet Japan's current annual LNG demand for about 25 years. Its cold climate makes the liquefaction process more energy-efficient. Canadian LNG has a higher heat content than LNG from the United States. On top of that, there is strong political support in Canada for energy exports, ensuring long-term policy stability.

As of fiscal 2024, Australia supplies 38% of Japan's LNG. Although shipping times from Australia are similar to those from Canada, slower gas field development — driven by climate change policies — has raised concerns about future supply. To reduce risks, Japan has also prioritized LNG imports from the United States, Qatar, which has massive reserves, and Russia.

The US has significantly increased its LNG exports in recent years. Qatar, however, faces geopolitical risks, especially due to tensions with Iran. Japan continues to import LNG from Russia, but new projects have been put on hold under US sanctions. For instance, Japanese trading firms like Mitsui & Co are currently unable to engage with Russia's Arctic LNG 2 project.

Growing Electricity Demand

Japan's electricity demand is expected to grow as the number of data centers increases, driven by the expansion of artificial intelligence technologies. If decarbonization efforts do not progress, the government estimates LNG imports could rise by 12% by 2040, reaching about 74 million tons.

The LNG Canada project marks the first new LNG venture involving Japanese companies in around six years. With global instability highlighting the need for stronger supply chains, Canada's role as a new supplier is a major win for Japan. Further expansion of production capacity is also eagerly anticipated.

(Read the article in Japanese.)

Author: Katsufumi Sato, The Sankei Shimbun

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