Canadian liquefied natural gas (LNG) projects, particularly along the country’s western coast, are being positioned as a crucial part of Japan’s energy security and decarbonisation strategy.
However, a new report from the Institute for Energy Economics and Financial Analysis (IEEFA) raises doubts about this narrative, highlighting that Japan’s LNG demand has been steadily declining.
With LNG Canada set to begin operations next year, the race is on for new projects, such as Woodfibre LNG and Cedar LNG, to cash in on exports to Asia. Japan, one of the world’s largest LNG importers, has stated the importance of Canadian LNG to reduce its reliance on Russian energy.
In a 2023 visit to Ottawa, former Japanese Prime Minister Fumio Kishida stressed the “crucial role” of Canadian LNG for Japan’s energy transition.
Yet, this emphasis on LNG appears increasingly misplaced. Japan’s LNG demand has dropped by 25% since 2014, with government forecasts indicating a further decline of 25% by 2030 as the country pivots towards nuclear power and renewables. “Why, then, is Japan pressuring countries like Canada to ramp up LNG production?” the IEEFA report asks.
One possible reason lies in the reselling of LNG. In fiscal year 2022, Japan resold nearly 32 million tonnes of LNG to other markets, exceeding the combined annual export capacity of the three Canadian LNG projects currently under construction.
The resale volume also surpasses potential capacity from Canada’s largest proposed LNG project, the 12 MTPA Ksi Lisims LNG facility.
This trend is driven by major Japanese buyers such as JERA and Tokyo Gas, who have already committed to purchasing LNG from the Canada LNG project.
However, IEEFA found both companies are likely to have a surplus of LNG supplies through 2030 and have plans to expand their LNG business outside of Japan, eyeing opportunities in other Asian markets.
Japan’s Ministry of Economy, Trade and Industry (METI) has set a target for domestic companies to handle 100 MTPA of LNG transactions by 2030—far above the country’s own projected needs.
Such strategies highlight Japan’s focus on business expansion rather than bolstering domestic energy security. The report warns that these efforts risk locking Asian nations into fossil fuel infrastructure for decades, hampering the region’s clean energy transition.
Canadian LNG advocates argue that Japan will be forced to rely on energy from Russia or Qatar without supply from allies like Canada. Yet, Japan’s combined imports from these two countries have fallen 65% since 2013, despite no Canadian LNG reaching Japanese shores.
Claims that Canadian LNG could help displace coal-fired power in countries like China and India also fail to hold up to scrutiny. Gas makes up just 3% of China’s electricity generation, while wind and solar have quadrupled their share to 16%. In India, gas’s contribution has dropped to less than 3%, while renewables have grown to 10%.
“Renewable energy—not gas or LNG—is providing the biggest competition for coal in both countries,” IEEFA states, driven by lower costs and greater energy security.
As global LNG export capacity grows at unprecedented levels, a looming oversupply could see revenues for sellers—including Canadian exporters—fall.
The IEEFA report suggests that Canada should shift its focus away from LNG and use its geopolitical influence through forums like the G7 to support real climate solutions, rather than prop up Japanese gas interests in Asia.
The full report is available to read here.
