Geopolitical risks: Japan plans to restrict gas use

Japan plans to introduce measures to restrict use of city gas and support fuel procurement.

The proposals are an attempt to mitigate the effects of large-scale disruption to liquefied natural gas (LNG) imports amid lingering fears about energy supplies from Russia.

Resource-poor Japan faces a historic energy security risk amid the growing threat of gas supply cut-offs from the Sakhalin-2 project in Russia at a time when global supply is tight and spot prices are sky-high.

The scheme has been discussed since July by a working group of external energy experts. 

A report on city gas released this week by the working group under the industry ministry includes a scheme enabling state-run Japan Oil, Gas and Metals National Corp (JOGMEC) to buy LNG on behalf of city gas providers in case the companies become unable to purchase the fuel.

Such a scheme was added to the Electricity Business Act which regulates the power sector about two years ago, but it is not included in the Gas Business Act which regulates the gas sector. The scheme has never been used, according to the industry ministry.

Gas companies are advised to make preparations in advance so that alternative procurement and purchases from other LNG buyers, including electricity utilities, can be conducted smoothly in the event of supply disruptions, the report said.

On the demand side, Japan may also make necessary legal amendments to force city gas users to restrict the use of the energy during severe supply crunches.

Such a scheme already exists for the electricity sector, but not for the gas sector.

The government aims to make the measures effective before heating demand rises in the winter, an official at the industry ministry said.