How Japan and other energy importers can spur global methane action

Negishi LNG Terminal, Yokohama City, Kanagawa Pref., Japan

Announced at COP 27, the joint declaration by key natural gas exporters, the United States, Norway and Canada, and importers, the European Union, Japan and Singapore, demonstrates the growing recognition that the supply and demand sides of energy markets must work together to reduce global methane emissions.

Methane, the main ingredient of natural gas, is a powerful climate pollutant, and the oil and gas industry is a main source of global emissions. As methane has shot up the international climate agenda, a great deal of attention has focused on countries that produce the lion’s share of the world’s oil and gas. But big energy importers like Japan, which often don’t have significant domestic fossil fuel resources, also have significant opportunities to stimulate and speed emission reductions industrywide.

A new analysis conducted for Environmental Defense Fund by independent global research firm Rystad Energy explores how Japan can leverage its unique market position to drive global methane reductions.

A Powerful Customer, Already Acting on Methane

Japan relies extensively on liquefied natural gas ,LNG, to power its economy and has the world’s largest LNG import capacity. More than 98% of the country’s natural gas demand is met by imported LNG — sourced primarily from Australia, Qatar, the United States, Malaysia and Indonesia. It’s estimated that three-quarters of Japan’s lifecycle methane emissions occur in other countries, and Japan has joined other large importers like the EU in key multilateral initiatives aimed at driving down these emissions as quickly as possible.

It was an early signer of the Global Methane Pledge, GMP, and an inaugural member of the GMP Energy Pathway — a coalition of GMP countries who have committed to provide technical and financial assistance to efforts to reduce oil and gas industry methane emissions. More recently, the Ministry of Economy, Trade and Industry of Japan, METI, and PETRONAS — Malaysia’s state-owned oil and gas company – agreed to collaborate on upstream methane abatement. The sum of Japan’s activity is clear. It has emerged as a major player in pushing global methane momentum.

Rystad’s analysis examines how its role and influence could expand.

Collaboration with Sellers, Buyers, and Equity Partners

Japan will likely need natural gas for some time, even as it transitions to zero-emission energy. Encouraging reductions of methane emissions across the oil and gas system now through investment and regional cooperation offers a powerful way for Japanese officials and companies to demonstrate their commitment to a decarbonized future. Leveraging Japan’s market position to prompt suppliers to embrace tighter emission controls and capture otherwise wasted gas is among the most promising opportunities and one that can send a ripple of methane action through the entire industry.

As a major LNG buyer, Japan is well-equipped to work with its suppliers to incentivize and implement emission measurement and reporting strategies based on initiatives such as the UN-backed Oil & Gas Methane Partnership. In the near term, Japan could prioritize credibly-certified low methane intensity gas for the sizable portion of its LNG demand that is not locked in to long-term contracts.

There are also ample opportunities for cooperation with GMP countries, from which Japan sources 83% of its LNG. Its relationship with the United States has particular potential; the two countries have already committed to working together to reduce methane. Australia would also be an obvious partner. It is the biggest LNG supplier to Japan, just joined the GMP, and is home to multiple Japanese oil and gas assets.

Similar opportunities exist among Japan’s fellow importing countries, who will also look to cross-country and cross-company collaboration to reach their own net-zero pledges and targets. As the world’s largest LNG customer, Japan can facilitate international methane collaboration with other large importing regions such as Europe, South Korea and China to incentivize lower emissions and better reporting along LNG supply chains.

Finally, Japan also has some pull given its extensive oil and gas equity investments, which have more than doubled since 2000 to hundreds of upstream assets around the world. This affords Japan the means to make recommendations to its partners that are consistent with its own commitments, such as implementing leak detection and repair policies, eliminating routine venting and flaring, and adopting measurement, reporting and verification practices.

Japan has come a long way over the course of just one year and is poised to go even further. The steps it takes next are important for realizing the full potential of its commitments. The good news: Rystad’s research shows that Japan is well-positioned to act and has the clout and capacity to increase exporter and importer cooperation to drive methane reductions globally, which is central for the country to meet its methane pledges.