JAPAN NEED LNG

S&P GLOBAL - February 10, 2025 - Japan will consider importing US LNG, including from Alaska, should supplies come online and prove economical compared with alternative sources, a Japanese government source told S&P Global Commodity Insights on Feb. 10, as refiners assess the economics of Alaskan North Slope crude.

"At the end of the day, if LNG is really delivered from Alaska [to Japan], it would be considerably competitive," the source said, referring to an estimated shipping time of around eight days.

"If [gas] does get produced and transported to a liquefaction point for LNG at a competitive price, this will be favorable for Japan, compared with LNG supply from other countries."

"However, we must scrutinize whether it can be realized in the end by carefully looking at development situations," the source said. "We cannot be complacent because we must accept that developments there have historically been difficult, as a matter of fact."

Summit meeting

US President Donald Trump said Feb. 7 that the US and Japan are in talks about an Alaskan pipeline and expanding Japan's imports of US LNG after meeting with Japanese Prime Minister Shigeru Ishiba at the White House.

"We're talking about a joint venture of some type between Japan and us having to do with Alaska oil and gas, and that's very exciting," Trump said. "They're very excited about it. So are we."

Trump also said that Japan, already a major global LNG buyer, "will soon begin importing historic new shipments of clean American liquefied natural gas in record numbers."

"It will be record numbers," Trump said.

In a joint statement, the two leaders announced their intention to bolster energy security "by unleashing the US' affordable and reliable energy and natural resources" and "by increasing exports of US LNG to Japan in a mutually beneficial manner."

Japan imported 6.34 million mt of US LNG in 2024, accounting for 9.6% of the country's total LNG imports of 65.89 million mt, according to data from the Ministry of Finance.

When asked whether it would boost US LNG lifting volumes, a spokesperson for JERA -- Japan's largest power generation company -- said it will intensify efforts to diversify its LNG supply portfolio following the US-Japan summit meeting.

"We have recognized US LNG as a strong supply source from the perspectives of supply stability as well as its economics," the spokesperson said.

"In view of business environments, we have continuously considered building an LNG portfolio, including the possibility of raising the US LNG procurement ratio."

Alaska LNG

The Alaska LNG project would link Alaska North Slope supplies through a pipeline more than 800 miles long, estimated to cost over $10 billion, to an LNG export terminal in Nikiski on the Kenai Peninsula in southern Alaska. If constructed, the 20 million mt/year terminal would provide a shorter shipping route to key demand centers in Asia compared with rival export projects on the US Gulf of Mexico.

The Alaskan government entity managing the state's effort to build the project has long struggled to overcome challenges, including the high price tag and difficulty securing customers. The state has been working to turn the project over to private interests and, in January, said it had signed a framework agreement with US-based developer Glenfarne to lead and fund the development of the project.

"As the [Alaska LNG] project is to be a major development, securing political-level momentum is supportive," said Hiroshi Hashimoto, senior fellow at the energy security unit of the Institute of Energy Economics, Japan.

"Expressing willingness to lift [LNG] and participate in the project from Japanese and other Asian markets will help build further momentum," Hashimoto said, adding that a key to the realization of the project depends on detailed project costs and its competitiveness, even after considering environmental and greenhouse gas control aspects.

ANS crude

In terms of procuring crude from the US, ANS could be another crude grade featured in Japan's refinery feedstock basket in 2025.

However, compared with the popular WTI Midland crude, the refining and logistical economics of ANS crude are not as favorable, according to a feedstock management source at ENEOS with close knowledge of Japan's previous ANS crude purchases.

ENEOS -- Japan's largest refiner -- has a history of purchasing several Suezmax cargoes of ANS crude for delivery to its Kiire oil storage terminal in Kagoshima prefecture, located in Japan's southwest.

"Ideally, it's better to procure crude oil in a few million barrels stems to maximize the economics, but ANS supply often falls short of satisfying a large pool of international buyers every trading cycle," the feedstock source said. "WTI Midland comes in 2 million barrel VLCCs, and supply for Asian buyers is always plentiful."

ANS is a medium sour crude with a gravity of 32.0 API and a sulfur content of 0.96%.

Japan last took ANS crude in June 2016, when it imported 143,598 kiloliters, or 903,203 barrels, according to data from the Ministry of Economy, Trade and Industry.

Japan purchased 56,714 b/d of mostly light sweet WTI Midland crude from the US in 2024, up 6.1% from 2023.

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