Japan back to long-term LNG deals on AI boom, energy plan:

Japan back to long-term LNG deals on AI boom, energy plan:

Static GK   /   Japan back to long-term LNG deals on AI boom, energy plan:

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The Hindu: Published on 20th June 2025:

 

Why in News?

Japan is returning to long-term LNG (liquefied natural gas) deals after a decade of reduced imports due to nuclear restarts and renewables. The sudden surge in AI-driven energy demand, high costs of green fuels (like hydrogen/ammonia), and Japan’s new Strategic Energy Plan have collectively brought LNG back to focus as a key transition fuel.

 

Background:

Post-Fukushima disaster (2011), Japan had increased LNG imports, which declined over time due to renewable energy and restarting nuclear plants.

LNG importers hesitated signing long-term contracts due to prior energy policies centered on decarbonization.

7th Strategic Energy Plan (Feb 2024) now identifies LNG as essential even beyond carbon neutrality targets.

 

Key Issues:

Surge in power demand due to rapid growth of AI-driven data centers.

Hydrogen and ammonia once seen as cleaner alternatives have become less economically viable.

Energy security concerns and price volatility have pushed Japan to secure stable long-term LNG contracts.

 

Strategic Shifts:

Japan is now actively:

Replacing coal with gas-fired power plants (7 GW auctioned capacity).

Increasing LNG-fired capacity to 85.75 GW by 2034.

Projecting data center power consumption to rise 80% by 2030.

Encouraging public-private partnerships to lock long-term LNG supply deals.

 

Economic and Energy Impact:

LNG imports expected to rise to 78 million tonnes by 2030, per Morgan Stanley.

Ensures power reliability during digital expansion (especially AI/data centers). 

Supports smooth energy transition, avoiding economic disruptions from premature green shifts.

Promotes investor confidence via regulatory clarity and contract stability.

 

Geopolitical Implications:

Japan is diversifying suppliers:

15-year deal with Abu Dhabi’s ADNOC (Osaka Gas).

First U.S. long-term deal by Kyushu Electric with Energy Transfer.

JERA signs 4 major 20-year deals with U.S. LNG producers.

Strengthens energy ties with U.S. and Middle East, reducing over-dependence on any single region.

 

Environmental & Policy Angle:

  • Reflects realism in energy transition – prioritizing LNG as a reliable bridge fuel until decarbonization technologies mature.
  • Supports Japan's net-zero goal by 2050, without risking energy shortfalls.
  • Highlights global trend of balancing climate targets with energy reliability and tech demand.
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