Japan to sign LNG deal with Italy for emergencies amid supply concerns

With the Russia-Ukraine war dragging on and the Middle East crisis intensifying, the Japanese government said on Sunday that it will sign a memorandum of understanding to purchase liquefied natural gas from a large Italian energy business during crises. This comes amid growing concerns over the country’s energy supply.

Negotiated with the Italian government, which has a part in Eni, the agreement would allow Japan to buy LNG from the Rome-based oil giant Eni through the government-backed Japan Organisation for Metals and oil Security.

Specifics like the amount and cost of the transaction have not yet been determined.

According to a person familiar with the matter, Eni wants to acquire backing from Japanese businesses for an LNG project in Mozambique, southeast Africa, in exchange for the LNG purchase agreement.

Japan increased LNG imports to run more thermal plants in the absence of nuclear power following the 2011 Fukushima nuclear crisis. LNG prices soared following Russia’s invasion of Ukraine, raising electricity and gas bills.

In addition, Iran’s ballistic missile launch last week towards Israel in response for Israeli bombings in Beirut and other recent military activities escalated the situation in the Middle East.

Amid the tension, worries have increased that Iran would prevent shipping via the Strait of Hormuz, a crucial route for LNG carriers, including those from two top exporters, Saudi Arabia and Qatar.

Only around 10% of Japan’s LNG imports come from the Middle East; the remainder come from Australia and Malaysia.

However, procurement and prices for resource-poor Japan would unavoidably be influenced if the situation there has an impact on the LNG market.