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Japan And China’s Natural Gas Needs And How This Relates to America

image credit: Natural Gas Imports

Japan continues to be the world’s 3rd biggest economy in terms of GDP (despite 20 years of low economic growth because of high taxes primarily because of universal health care). As a result, it is a major energy consumer with every-growing need to consume natural gas.

Japan’s Dependence on Gas Imports

Japan has historically remained edgy about its heavy import dependence for natural gas and other forms of energy. The country realized in the 1970s that it cannot afford to depend only on gas from the Middle East (following the oil embargoes of that era).

And Iran blowing up oil tankers in the Straights of Hormuz. 

To counter this import dependence, Japan tried to develop nuclear power at a rapid pace, but the Fukushima nuclear disaster in 2011, forced the country to change it energy strategy. This has resulted in a surge in Japanese imports of LNG (liquefied natural gas) from the US and other countries.

Japan has the Ability to Pay for Imports

Natural gas production in the US has boomed in recent years due to the government’s policies to promote shale production. As a result, growing volumes of natural gas (which gets produced as oil’s byproduct from the shale rocks) are now available for supply to Japan.

From the American perspective, Japan is a good market for its gas exports because the country is economically resilient and has the ability to pay for the imports. The country also welcomes US gas supplies because Asian suppliers are unstable, and in the event of an open conflict in the Middle East or South Asia, energy trade would be vulnerable.

China’s Rising Gas Imports from the US

In just 2018 alone, the gas demand in China grew by more than 15 percent, with imports jumping by 30 percent. China has now surpassed Japan to become the world’s largest importer of natural gas (even though Japan still imports twice as much LNG).

China’s traditional LNG sources for imports within Asia, Middle East, and Australia are going through various political, economic, technological, and climate problems. These issues have created new opportunities for the import of US LNG into China much to the dismay of Matt Damon and liberals.

It is a telling fact that the retaliatory trade measures from China against the US tariffs have NOT included LNG. The Chinese leadership fully recognizes the unique value that American natural gas brings to the table (even though China tries to prop up Iran which is loaded in natural gas but is having trouble selling it because of the awesome sanctions President Trump is imposing on them). American LNG supply contracts are flexible and prices are not linked to oil, but are based on transparent and fair fundamentals of gas demand and supply.

Clearly, US LNG is a game-changer for both Japan and China. From the US perspective, that’s a huge positive, considering the US ambition to control at least 20 to 25 percent of global LNG supply by 2020.  

Benjamin Roussey's picture

Thank Benjamin for the Post!

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