Japan to Double Canadian LNG Production, Accelerating Efforts to Reduce Middle East Dependence

[Financial News | Tokyo—Correspondent Hye-jin Seo] Mitsubishi and the UK's Shell will invest approximately $14 billion (about 19 trillion won) to double Canada's liquefied natural gas (LNG) production capacity. Japanese companies are expanding their North American supply chains as the effective blockade of the Strait of Hormuz disrupts energy supplies from the Middle East.
According to Nihon Keizai Shimbun (The Nikkei) on the 29th, Mitsubishi, Shell and other companies announced plans that day to proceed with Phase 2 of LNG Canada on the country's west coast. By adding liquefaction facilities near the existing plant, annual production capacity will rise from the current 14 million tonnes to 28 million tonnes in the early 2030s.
LNG Canada transports Canadian natural gas by pipeline to the west coast, liquefies it and exports it. Shell holds a 40% stake, Malaysia's state-owned Petronas holds 25%, Mitsubishi and China National Petroleum (CNPC) each hold 15%, and Korea Gas (KOGAS) holds 5%. The Phase 1 project shipped its first cargo last year.
Based on its stake, Mitsubishi will contribute approximately $2.1 billion (about 2.85 trillion won) to Phase 2. Once the expansion is complete, the company's annual LNG sales volume secured through the project will increase from 2.1 million tonnes to 4.2 million tonnes.
Mitsubishi plans to sell the LNG to Japanese power and gas companies as well as countries across Asia. If all 4.2 million tonnes are supplied to Japan, the volume would account for approximately 6% of the country's LNG consumption.
Canadian LNG also has an advantage in terms of transportation routes. It takes approximately 10 days one way to transport LNG from Canada's west coast across the Pacific to Japan. The route also avoids maritime chokepoints such as the Strait of Hormuz and the Strait of Malacca.
Japan imported approximately 880,000 tonnes of Canadian LNG from April to August this year, about 13 times more than during the same period a year earlier. Imports from Qatar and the United Arab Emirates (UAE) totaled approximately 130,000 tonnes during the same period, plunging 93%.
Japan is also diversifying its sources of crude oil. U.S. crude accounted for 37% of Japan's crude oil imports in July, the largest share among individual countries. The Ministry of Economy, Trade and Industry of Japan (METI) is also expanding alternative crude oil procurement, including from the United States, in response to potential supply disruptions through the Strait of Hormuz. 
Mitsubishi is also increasing its investments in North America, including its acquisition of U.S. natural gas developer Aethon Energy Management last July. Through the expansion of its Canadian operations and other projects, the company plans to increase its share of global LNG production capacity from approximately 15 million tonnes per year as of March to more than 18 million tonnes in the early 2030s.


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