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Kyushu Electric Poised to Invest in U.S. LNG Project, Diversifying Away from Russian Imports

In a strategic shift, Kyushu Electric considers a significant investment in the Lake Charles LNG project in Louisiana, enhancing energy security
Japan
k 9508.TSE Mid and Small Cap 2000
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Kyushu Electric Power is actively considering a major strategic shift in its energy procurement. The company is evaluating the acquisition of a 10% stake in the Lake Charles liquefied natural gas (LNG) project located in Louisiana, USA. This move is part of a broader plan to purchase 1.6 million tonnes of LNG annually for 20 years, alongside other Japanese utilities.

This initiative aligns with the Japanese government’s efforts to decrease reliance on Russian energy imports, especially in light of the geopolitical changes following Russia’s invasion of Ukraine. Japan’s energy strategy has been significantly impacted by the need to replace LNG from Russia’s Sakhalin-2 project, from which Japanese utilities currently import about 6 million tonnes annually.

The Lake Charles project, spearheaded by Energy Transfer, a U.S. midstream company, is set to produce an impressive 16.5 million tonnes of LNG per year. The project’s development, estimated to exceed $10 billion, is scheduled to commence operations in 2028.

Kyushu Electric’s plan extends beyond mere procurement. The company aims to aggregate LNG for regional utilities, with discussions currently underway about the scale of Japanese involvement. This potential investment in the Lake Charles project signifies Japan’s urgent need to secure long-term, economically viable LNG sources.

Japan’s commitment to diversifying its energy portfolio is evident in its consideration of financial support through entities like the Japan Bank for International Cooperation (JBIC) and the Japan Organization for Metals and Energy Security (JOGMEC). Such investments echo previous Japanese engagements in U.S. LNG projects, such as Cameron LNG in Louisiana and Freeport LNG in Texas, which have become symbols of Japan-U.S. energy cooperation.

The shift in Japan’s energy sourcing is underscored by recent customs data: in the last year, Japan imported over 5 million tonnes of Russian LNG, a figure nearly matched by U.S. LNG imports. This balance reflects the changing global energy landscape, with American LNG production now leading the world, driven by Europe’s pivot away from Russian pipeline gas.

As Kyushu Electric and other Japanese utilities navigate these changes, the investment in the Lake Charles project represents a significant step in Japan’s ongoing quest for enhanced energy security and sustainable sourcing.

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