How Japan thinks about energy security

Japan has also sought to strengthen access to foreign oil and gas projects through investments from government institutions such as the Japan National Oil Corporation (JNOC) as well as private companies. She emphasized strong diplomatic engagement with countries with rich resources, including hydrocarbons and non-ferrous metals and minerals. Japan has also actively engaged in establishing cooperation and consultations among oil-consuming countries, especially through the IEA.

During the period of high oil prices at the beginning of the 21st century, the concept of: resistance has gained significant importance in Japan’s energy policy, emphasizing the importance of building up oil reserves and consulting with oil and gas trading partner countries. The Japanese government has redoubled its efforts to diversify energy sources, including significantly promoting the use of nuclear energy and implementing a project to reprocess spent nuclear fuel. The third strategic energy plan issued in 2010 aimed to achieve a 50% share of nuclear energy in Japan’s energy supply by 2030. This goal was thwarted by the Great East Japan Earthquake in March 2011, which led to a fundamental change in the country’s energy strategy . Post-earthquake nuclear safety regulations and anti-nuclear public sentiment brought most of the nuclear power plant fleet to a halt for the next several years.

The U.S. shale oil and gas revolution has strengthened Japan’s push for import diversification increasing energy security while the government worked to gradually restart nuclear reactors. The common features of U.S. LNG contracts, such as destination flexibility and price indexation to low U.S. domestic gas prices, appealed to Japanese policymakers and business leaders looking for alternatives to the rigidity of traditional LNG contracts. A 2017 investigation by Japan’s Fair Trade Commission found that new free LNG onboard deals with restrictions such as destination clauses could be interpreted as a violation of Japanese antitrust laws, reinforcing the preference for flexibility in the contracted supply portfolio for Japanese enterprises.

While the growth and diversification of LNG supplies have strengthened Japan’s push for economic efficiencyRussia’s war with Ukraine has raised serious concerns about energy security. European economies have rushed to secure non-Russian sources of oil and gas, and Western sanctions on Russian energy projects have complicated Japan’s ties with one of the few major suppliers outside the Middle East. The Russian invasion put emphasis on physical access in Japan’s energy security strategy. For example, the strategic LNG buffer system launched in December 2023 requires companies to secure at least one additional cargo of LNG per month during the peak winter demand period to protect against potential supply disruptions.

Resource diplomacy and strategic investments

As an island nation with almost no domestic hydrocarbon resources, Japan has focused for decades on ways to secure its energy supplies and protect against external shocks. It has traditionally been dependent on oil imports from Middle Eastern countries, including Saudi Arabia, the United Arab Emirates (UAE) and Kuwait. LNG imports are more diversified, with existing supply deals from Indonesia, Malaysia and Brunei recently being eclipsed by LNG supplies from Australia. Qatar and Oman remain among Japan’s largest Middle East LNG suppliers.

Extreme dependence on fossil fuel imports required Japan to protect itself from supply disruptions, maintain strong relationships with energy exporting countries, and invest across the energy value chain to strengthen its energy supply. These strategic investments can be seen across regions and industries, such as Japan’s energy ties with the Middle East and its role in supporting LNG projects.

Energy investments in the Middle East

Japan has been making strategic energy investments in the Middle East for decades. It is one of Saudi Arabia’s largest oil export markets, and Japanese companies have invested in the domestic petrochemical industry, which remains open to capital investment (unlike the domestic mining sector, where Saudi Aramco has a monopoly). Saudi Arabia’s first generation of chemical projects included joint ventures with Japanese companies such as Sumitomo. In the United Arab Emirates, Japan has been a partner in the oil and gas sector since the 1970s, with companies such as Jodco (a local subsidiary of Inpex) and Cosmo Oil operating smaller concessions, while major concessions from the United States and Europe collaborate on the largest concessions on land and at sea. Inpex is an important partner of Abu Dhabi National Oil Company for onshore and offshore concessions, as well as for newer onshore exploration blocks. In Qatar, Japanese companies including Mitsui and Marubeni were joint venture partners on the country’s first LNG trains, with Chubu Electric being the lead buyer. Japanese lenders and the Japan Export Credit Agency have provided vital funds to help revive Qatar’s LNG industry. In Iraq, several Japanese companies gained shares in post-war oil and gas bidding rounds.