Japan is banking on a Canadian project that started full-scale operations in November to export liquefied natural gas (LNG) used for thermal power generation and city gas production.

Since the Russia’s invasion of Ukraine in 2022 disrupted LNG networks and supply chains, Japan has scrambled to secure LNG procurement sources for its economic security.

With the LNG Canada project in the western province of British Columbia, Japan can take advantage of its location and the reduced risk of stalled shipping.

This is the first time for Japan to import LNG from Canada on a full-scale basis.

Mitsubishi Corp. holds a 15-percent stake in LNG Canada and has the right to sell 2.1 million tons of LNG per year to Japan and other Asian countries.

Other shareholders include Shell Plc of Britain, Petronas of Malaysia, PetroChina Co. of China, and Korean Gas Corp. of South Korea.

Total development costs reached about $14 billion. The project is capable of producing 14 million tons of LNG a year.

The first shipment was made on June 30.

Natural gas produced in inland regions of Canada is transported through a 670-kilometer pipeline to the Pacific coast, where it is cooled to liquid form and shipped on LNG carriers. LNG Canada now has two production lines in operation.

Mitsubishi expects the project to begin generating several tens of billions of yen in profits from the business year starting in April 2026.

During a news conference on Nov. 4, Mitsubishi President Katsuya Nakanishi said the company is carefully considering additional investments to increase production capacity.

One company source said capacity could double.

LNG Canada’s export terminal faces the Pacific Ocean, meaning it takes about 10 days to transport LNG to Japan.

In comparison, it takes between 16 and 30 days to ship LNG from the Middle East and the U.S. Southeast region.

Along with the lower transportation costs, the Canada LNG project has fewer geopolitical risks.

Shipments can avoid the Straits of Hormuz, which is surrounded by Middle East conflicts, and the Panama Canal, where passage restrictions can be imposed due to low water levels.

Both waterways are strategically important ocean shipping routes called “choke points.”

‘POSSIBLE POWER OUTAGES’

“We, the government, have high hopes. It means a lot not having to go through the choke points,” said a government official who has long been in charge of energy security.

In addition to the geopolitical advantages, Canada is a friendly nation to Japan.

Before the war in Ukraine, Japan relied on Russia for about 10 percent of its LNG imports, most of which came from the Sakhalin-2 project in the Russian Far East.

Mitsubishi and Mitsui & Co. also hold stakes in the Sakhalin-2 project.

But after Japan imposed economic sanctions against Russia, President Vladimir Putin’s administration put pressure on Japan by changing the project’s operator and taking other measures.

LNG procurement costs soared in the spot market on global concerns over the LNG supply from the gas-rich country.

“We had thought it would be OK if we diversified procurement sources, but we were at risk of power outages even if only 10 percent (of LNG) didn’t reach Japan,” the source added.

In October this year, the U.S. administration told Japan that it expects Tokyo to stop importing Russian energy, renewing concerns over LNG supply.

Europe and other parties had remained cautious about expanding use of LNG in consideration of decarbonization. But they are now making strenuous efforts to procure LNG following Russia’s invasion, causing a scramble across the world.

Under Japan’s Economic Security Promotion Law, LNG is listed as a “specified critical product.”

The government has established a fund to ensure stable LNG supply and secure a substantial volume in the event of a contingency.

In Japan’s Basic Energy Plan drawn up earlier this year, the country is expected to import 74 million tons of LNG in 2040, up by about 10 percent from the current level.

Nuclear power was positioned at the center of discussions for the plan.

But a senior economy ministry official said, “Nuclear power is the key player in the spotlight, but thermal power (mainly fueled by LNG) is the key player behind the scenes.”

That thinking has fueled government efforts to secure procurement sources.

Mitsui is also working on a new LNG project in Mozambique.

Although the project has been suspended due to political uncertainty in the African country, the trading firm will resume construction as soon as the situation allows.

JERA Co., one of the world’s largest buyers of LNG, announced in September that it is considering procurement from an LNG development project planned in the U.S. state of Alaska.

JERA, which generates electricity mainly through thermal power plants, intends to procure at least 1 million tons of LNG annually over 20 years.

Although there are concerns about the project’s economic feasibility, Alaska LNG offers benefits such as avoiding the choke points.