A senior executive at Japan’s largest LNG buyer has issued a dire warning on Australia’s export future, while flagging a desire to further diversify its supply chain to markets abroad.
A senior executive at Japan’s largest LNG buyer has issued a dire warning on Australia’s export future, while flagging a desire to further diversify its supply chain to markets abroad.
JERA Co LNG division senior vice president Hitoshi Nishizawa used a politically charged speech at the Energy Exchange Australia conference in Perth to flag his company’s intention to diversify its supply mix away from Australia from 2030.
Mr Nishizawa said Australian jurisdiction was becoming less reliable as others – like the US and Qatar – became more attractive for buyers like JERA.
He flagged that JERA would look to spread its risk profile when its existing share purchase agreements came up from 2030.
“What many people may not have recognised, including politicians, is that around 2030 and on, some SPAs and equity arrangements will expire,” he said.
“This means, given the duration of around 20 years or so for long-term contracts, that a significant volume of the current Australian LNG contract with Japan – which started in their deliveries in [the] mid- or late-2010s – are due to end around 2030 and onward.”
Mr Nishizawa warned that while Australian LNG projects faced headwinds and uncertainty in the current regulatory environment, others were making strides to open up their supply in time for the 2030 deadline.
He said it was “no secret” that North America and the middle east were two areas of “abundant potential” when it came to additional LNG supply into the future.
“Australian LNG will face fierce competition with other global supplies for future sales,” Mr Nishizawa said, flagging an intention to diversify JERA’s supply mix.
JERA’s global portfolio includes a 15.1 per cent equity stake in the Woodside Energy Scarborough project, as well as INPEX’s Ichthys project, Chevron’s Gorgon project and the Barossa gas project operated by Santos off the coast of the Northern Territory.
The portfolio represents investment in the order of billions and has been built from a desire over many years to secure energy for Japan into the future.
Projects such as Barossa and Scarborough have faced significant challenges legally over last few years, with the former stalled for more than a year over a claim the company had not properly consulted with traditional owners.
Mr Nishizawa said JERA was concerned by a range of factors in the Australian jurisdiction, where it sees rising costs, policy uncertainty and mixed messaging and approvals delays as major challenges.
He singled out the example of the retrospective application of the Safeguard Mechanism – requiring the nation’s largest emitters to offset or reduce their emissions – to Barossa after a final investment decision was taken, as a key example.
“It’s no secret that Japanese confidence in Australia was shaken,” he said of that saga.
He also called for federal support of carbon capture and storage.
With only months left before a federal election must be held, Mr Nishizawa issued a warning to Australian policymakers that improvement was needed to ensure ongoing investment from Japan.
“The clock is ticking, and inaction could potentially cost Australia thousands of jobs, billions of dollars of lost revenue and weaken regional partnerships,” he said.
A global leader in the field, a number of local LNG operators have warned of the foreign competition for Australian investment dollars in recent months – including Woodside, Santos and Chevron.
The political heat is likely to ramp up further in the lead up the federal election, with in-industry fears that a potential Labor-led minority government would need to strike a deal with the Greens and crossbench - likely to be to the detriment of the natural gas sector.
