{"id":84168,"date":"2023-12-13T06:00:05","date_gmt":"2023-12-12T19:00:05","guid":{"rendered":"https:\/\/www.aspistrategist.ru\/?p=84168"},"modified":"2023-12-12T17:46:31","modified_gmt":"2023-12-12T06:46:31","slug":"japans-trust-in-australia-erodes-in-response-to-energy-security-fears","status":"publish","type":"post","link":"https:\/\/www.aspistrategist.ru\/japans-trust-in-australia-erodes-in-response-to-energy-security-fears\/","title":{"rendered":"Japan\u2019s trust in Australia erodes in response to energy security fears"},"content":{"rendered":"
<\/figure>\n

For many decades, Japan has looked favourably on Australia as a reliable producer of gas and coal<\/a>. Japan\u2019s long-term investments in Australia undoubtedly were a product of our natural endowment, but also the reliable and predictable legislative environment. This is increasingly not the case<\/a>.<\/p>\n

Concerned about the future reliability of the Australia\u2013Japan multi-decade partnership in resources and energy investment and trade, Japan\u2019s government and industry are becoming increasingly vocal about the importance of energy-supply security and certainty.<\/p>\n

From the Japanese prime minister to the boss of energy conglomerate INPEX, supply security has been the focus of several recent speeches, interviews and no doubt meetings with Australian government representatives. The frequency and decidedly un-Japanese tone of recent statements is a clear indicator of the depth of Japan\u2019s concerns.<\/p>\n

By its lack of response despite some soothing words<\/a> in October, Australia appears less than galvanised by Japan\u2019s newfound directness and Japan seems unconvinced of a significant change in direction<\/a>. Inaction by Australia could well have very real economic impacts, as well as perverse outcomes for global decarbonisation.<\/p>\n

Japan has signalled by words and actions<\/a> that it is looking elsewhere for future liquefied natural gas supply to shore up energy security. That could not only result in new LNG investment forgone in Australia but also threaten the emerging hydrogen and ammonia industries, which will rely on Japan as both customer and investor.<\/p>\n

Japan\u2019s disquiet about the potential consequences of Australia\u2019s underappreciation of the trade and investment relationship isn\u2019t new, but it has increased in urgency due to looming threats to Japan\u2019s fuel security, in part as a result of recent Australian policy settings.<\/p>\n

In the early 2000s, the emergence of China as another major resources customer and investor raised Japanese concerns about Australia\u2019s focus being drawn away from Japan\u2019s underpinning role in resources development and exports, which was larger than ever.<\/p>\n

Delegates to a 2009 Indo-Pacific regional conference in Perth were left in no doubt that Japan was anxious about being taken for granted. Ambassador Takaaki Kojima gave an uncharacteristically blunt speech<\/a>, reminding delegates of the then 50-year investment and trade partnership and the fact that Japan had been Australia\u2019s largest export market for 40 years.<\/p>\n

Kojima pointed out that Australia was the largest energy supplier to Japan and that Japan was the largest Asian investor in Australia. He then said, with emphasis, \u2018[B]oth in Japan and Australia contracts are generally honoured in good faith. In case of disputes, rule of law is ensured.\u2019<\/p>\n

He spoke of \u2018bilateral business relations of mutual trust\u2019 and Japan and Australia being \u2018reliable and trustworthy partners\u2019, before pivoting, pointedly, to discussion of bilateral and trilateral (including the US) security cooperation.<\/p>\n

The Japanese ambassador\u2019s speech, which followed a speech by China\u2019s ambassador, Zhang Junsai, was a talking point among conference delegates who included the now resources minister, Madeleine King, who was the conference convenor.<\/p>\n

The interventions from Japan in 2023 have struck a more urgent tone, reflecting Japan\u2019s deepening concern about the long-term security of LNG supplies from Australia, which currently delivers 43% of Japan\u2019s gas needs<\/a>.<\/p>\n

Australia\u2019s new \u2018safeguard mechanism\u2019<\/a> requiring all new gas fields\u2014including those supplying existing LNG plants\u2014to meet net-zero goals threatens delays in replacement of gas from existing fields as they run down, as well as increased development costs. This is despite LNG proponents charting credible pathways to net zero, albeit over longer timeframes.<\/p>\n

At the same time, the use of Commonwealth environment and heritage laws to delay construction of the already-approved Barossa gas project<\/a> raises the possibility of other projects in Australia\u2019s northwest being similarly delayed.<\/p>\n

Other potential suppliers of gas to Japan may not be so firm about domestic net zero or as rigorous in applying contemporary environmental, social and corporate governance standards.<\/p>\n

In July, Prime Minister Fumio Kishida visited the Middle East, where he sought to strengthen economic ties and diversify LNG and oil supply. Qatar\u2019s leader said his nation was prepared to ensure stable LNG supplies. Qatar vies with Australia as the largest LNG exporter<\/a>.<\/p>\n

Japan\u2019s Institute of Energy Economics said in July that Australia was no longer being considered<\/a> to make up an expected shortfall in Russian LNG supplies. The opportunity cost for Australia could be huge. For example, the current two-train (processing plant) Ichthys LNG project, owned by INPEX and French company Total, generates $8 billion worth of exports each year and is estimated to contribute taxation revenue of $73 billion over its life. The Ichthys project has room for two additional trains, which would at least double its capacity.<\/p>\n

In November, Bloomberg<\/em> reported<\/a> that Japan\u2019s trade ministry asked gas importers to sign long-term LNG contracts to help insulate Japan from energy shocks in the face of potential further restrictions on Russian supplies and a predicted fall of 30% in current supplies.<\/p>\n

Resources investment and trade with Japan stretches back more than 60 years.<\/p>\n

In the 1960s, Japan became the first customer for iron ore from Western Australia and for large-scale coal mining from Central Queensland. It was a foundation investor in both. Thus began the long and deep Australian\u2013Japanese resources partnership that has hugely expanded iron ore and coal production and extended to other minerals and LNG\u2014plus commercial demonstration of hydrogen production and shipping.<\/p>\n

Japan was also Australia\u2019s first LNG customer and foundation investor<\/a>. It has repeatedly emphasised the importance of Australia\u2019s reliability as its preferred supplier of energy and minerals.<\/p>\n

Resources companies are keenly aware of this: their relationships with Japanese customers go far beyond the transactional. LNG developers have emphasised<\/a> the importance of reliability of supply in Japan\u2019s decisions to invest and enter long-term contracts.<\/p>\n

Australia has plenty of untapped gas resources to both keep current LNG plants going for decades and to develop new trains. Construction work has started on Woodside\u2019s Scarborough gas project and an additional LNG train at the Pluto plant, despite recently emerging uncertainties over approvals.<\/p>\n

The previous high probability of further expansion projects must now be in doubt in the light of Japan\u2019s energy security focus moving to gas-rich Qatar.<\/p>\n

In December, Woodside signed an LNG supply agreement<\/a> with Mexico Pacific\u2019s Saguaro Energia LNG on the west coast of Mexico to bolster supplies in the Asian region.<\/p>\n

LNG is not only vital to Japan\u2019s energy supply for electricity generation; it also underpins Japan\u2019s ability to decarbonise<\/a> to meet its 2050 net-zero target. Limitations of current battery storage technology mean that gas is critical to it being able to increase renewables penetration while providing reliable electricity supply.<\/p>\n

It would be ironic indeed if Australia\u2019s domestic net-zero goals applied to existing LNG projects imposed limits on Japan\u2019s\u2014and other customers\u2019\u2014ability to decarbonise.<\/p>\n

A perverse outcome would be Australia transferring carbon emissions to other supplier nations while forgoing the economic benefits of LNG expansion or even sustainment at home.<\/p>\n

Japan must also be quietly concerned about future rule changes affecting the security of ongoing supplies of metallurgical coal, increased supply of Australian uranium for its restarting nuclear power industry, and future large-scale hydrogen and ammonia to accelerate its decarbonisation.<\/p>\n

Another reason for Australia to be concerned is that the future hydrogen industry turns on Japan being a foundation investor and customer, just as it was for Australia\u2019s iron ore and coal 60 years ago and for LNG more recently.<\/p>\n","protected":false},"excerpt":{"rendered":"

For many decades, Japan has looked favourably on Australia as a reliable producer of gas and coal. Japan\u2019s long-term investments in Australia undoubtedly were a product of our natural endowment, but also the reliable and …<\/p>\n","protected":false},"author":1845,"featured_media":84170,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"footnotes":""},"categories":[1],"tags":[17,222,135,1935,1314],"class_list":["post-84168","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-australia","tag-energy-security","tag-japan","tag-lng","tag-oil-trade","dinkus-north-of-26-south"],"acf":[],"yoast_head":"\nJapan\u2019s trust in Australia erodes in response to energy security fears | The Strategist<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.aspistrategist.ru\/japans-trust-in-australia-erodes-in-response-to-energy-security-fears\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Japan\u2019s trust in Australia erodes in response to energy security fears | The Strategist\" \/>\n<meta property=\"og:description\" content=\"For many decades, Japan has looked favourably on Australia as a reliable producer of gas and coal. 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