Energy giant Santos has struck a 10-year deal to sell super-chilled liquefied gas to Japan, underscoring what the company argues is the Asian nation’s long-term appetite for imported gas even as the world tackles climate change.
As debate continues about the role of gas in the world’s transition to cleaner energy, the new deal between Adelaide-based Santos and Japan’s Hokkaido Gas comes as the Japanese government urges its importers to shore up liquefied natural gas (LNG) supplies with producers in Australia and elsewhere, analysts say.
A Japanese LNG tanker arrives at a Tokyo Gas terminal in Yokohama.Credit: Bloomberg
Russia’s invasion of Ukraine in 2022 disrupted international gas markets, igniting a historic global scramble for spare LNG supplies that pushed commodity prices to record highs and triggered energy security fears.
“Japan has belatedly been locking in long-term LNG supply after being caught flat-footed in the wake of the Ukraine war,” MST Marquee energy analyst Saul Kavonic said.
“Japan wants diversity of supply but, realistically, needs to take a lot of LNG from Australia as most supply originating in … the US are subject to greater shipping costs, and Russia and Mozambique supply is no longer reliable.”
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Under the long-term contract, Santos will provide Hokkaido Gas with 400,000 tonnes of LNG – gas that is super-chilled to the point it becomes a liquid so it can be transported on specialised ships – each year for 10 years from 2027.
Santos chief executive Kevin Gallagher said the deal showed the strong demand for high-heating-value LNG from Santos’ projects, including the $5.7 billion under-construction Barossa project off northern Australia and its part-owned PNG LNG project in Papua New Guinea.
“This supply and purchase agreement is a significant step in developing Santos’ equity LNG portfolio and establishes a long-term relationship with Hokkaido Gas, a Japanese gas utility providing natural gas within the Hokkaido region of Japan,” he said.