Facts about the LNG business

1. LNG dependence exposes Japan and other countries to high price volatility and financial risk

Increasing dependence on LNG makes our energy system vulnerable. This is because LNG is a fossil fuel subject to geopolitical conditions and therefore volatile price fluctuations. At the same time, it increases the financial risk for Mitsubishi and for Japan which imports the majority of its energy. 

Japan’s average LNG import price has soared from $7.78/MMBtu in 2020 to a recent $20/MMBtu. We can see from this example that it is very difficult to create a reliable mid to long term price forecast for LNG.  In addition, Japan spent 3 trillion yen on importing LNG in 2020, exacerbating Japan’s trade deficit.[1]

According to the Institute for Energy Economics and Financial Analysis, unaffordability of LNG and fuel supply insecurity “may cause new import terminals to go unused, potentially costing billions of dollars in stranded assets.” According to the International Energy Agency’s World Energy Outlook 2022, in their Net Zero Emissions by 2050 (NZE2050) scenario, “there is no further need for additional [LNG] capacity beyond what exists or is under construction.” In NZE2050, LNG trade halves by the mid-2030s, before declining sharply to 2050.

Because Japan and other countries face this price volatility risk, Mitsubishi could be left with stranded assets, affecting its long-term profitability. Moreover, reliance on LNG is problematic, especially given the opportunity cost this creates for the rollout of renewable technology.

2. Switching to LNG will not lead to decarbonisation

Switching from coal to LNG undermines efforts to achieve net zero emissions when considering greenhouse gas emissions over the entire lifecycle. Imported LNG emits a large amount of greenhouse gas when combined with emissions from extraction, processing, storage, and transportation in addition to combustion.

Companies claiming that “LNG is better for the environmentally friendly” underestimate the environmental impact of LNG throughout its full life-cycle emissions.  

Recent analysis shows that switching from coal to gas will not decarbonise the power system or meet the climate goals of the Paris Agreement. In order to limit the temperature increase to 1.5 degrees Celsius, necessary to avoid extreme weather events caused by the climate crisis, gas generation would need to decrease by 90% [2] over the next 20 years. 

Therefore, switching from coal to LNG is not appropriate for achieving net zero emissions.

Mitsubishi Corporation’s LNG Investment

Mitsubishi Corporation’s investments will emit GHG beyond 2050, undermining its own commitment to net zero by 2050

Despite its stated goal of reducing its greenhouse gas (GHG) emissions to net zero by 2050, Mitsubishi Corporation is currently bidding for and investing in new LNG projects in Bangladesh and Vietnam [3]. If built, these proposed LNG projects are expected to operate for several decades and would continue to emit GHGs after 2050. 

NZE2050 states that there is no room for new oil and gas fields, significant stranded asset risk for liquefied natural gas (LNG) facilities and that gas use for power must rapidly decline. 

However, Mitsubishi has no policy to rule out or in any way restrict the development of new oil and gas fields or new LNG projects. Instead, the company plans to expand LNG and gas power operations and is at significant risk of contradicting the goal and the timeline of net zero emissions by 2050. These projects also risk destroying the lives and livelihoods of communities residing by these projects.

Mitsubishi Corporation should restructure its business strategy consistent with its own climate commitments and the Paris Agreement and refrain from investing in new LNG projects.

Japan’s Fossil Gas Expansion

Local community members repairing their boats on the empty swathes of land set aside for Japan-backed LNG to power project proposed to be built in Matarbari, Bangladesh.

Photo credit: Market Forces

Disclaimer

This webpage is intended to convey factual information about the LNG project and Mitsubishi Corporation.

Information comes from the companies’ available annual reports and websites, Refinitiv Eikon, Bloomberg and various news reports.

Occasionally where information is incomplete, assumptions must be made about data and these were made in a consistent manner and in good faith. Whilst we have endeavoured to gather and include all relevant deals, we cannot guarantee the completeness of the information presented.

References

[1] Estimated from “Natural Gas and LNG Data Hub 2022” by Japan Oil, Gas and Metals National Corporation

[2] Estimated from ” World Energy Outlook 2022” by International Energy Agency

[3] According to financial subscription sources and news reports, in Bangladesh, Matarbari Summit LNG terminal and Matarbari LNG terminal and in Vietnam, Bac Lieu power plant and Long Son power plant