Japan’s energy giant JERA has locked in a 20-year liquefied natural gas (LNG) supply deal with Malaysia’s state oil company Petronas, set to begin in 2028. The agreement ensures an annual delivery of 2 million tons of LNG, bolstering Japan’s efforts to diversify its energy sources amid ongoing global instability.
This long-term contract comes as Japan faces increasing challenges in securing stable energy supplies following disruptions related to conflicts in the Middle East, a traditional source for much of the country’s oil and gas imports. Japan’s Prime Minister Sanae Takaichi emphasized the importance of strengthening ties with Malaysia, which currently stands as Japan’s second-largest LNG supplier after Australia and provides about 15% of its LNG imports.
JERA, the world’s largest LNG purchaser, has also announced plans to significantly expand its imports from the United States. The company aims to nearly triple purchases from the U.S. to 5.5 million tons annually, representing a substantial increase that would account for roughly one-third of its LNG imports.
Domestically, Japan’s energy demand is climbing, driven by higher summer temperatures that increase the use of air conditioning. This upward trend in LNG consumption comes despite elevated prices, with industry analysts warning of potential supply shortages. The country has already boosted coal-fired power generation to offset tight LNG supplies, reflecting a broader regional challenge as Asian nations compete for limited, affordable LNG cargoes.
Market forecasts from financial institutions like Morgan Stanley suggest LNG prices could surge further, reaching levels not seen in recent years, driven by intensified summer demand and European efforts to refill gas storage ahead of winter. The new supply deal with Malaysia positions Japan to better manage these market pressures and reduce vulnerability to geopolitical disruptions.