Japan’s push for more gas in Asia raises questions

Japan wants to increase natural gas storage across Asia to strengthen energy security in response to the Hormuz crisis, but high LNG prices, volatility, and supply disruptions have many Southeast Asian economies looking to renewables instead.

Earlier this year, as oil and gas prices and shortages impacted Asia’s economy, Japanese Prime Minister Sanae Takaichi proposed a regional plan — POWERR Asia. This Japan-led effort would, with support from the International Energy Agency and the Asian Development Bank, help countries in Southeast Asia and the Pacific build resilience against future energy shocks. It is closely linked to Japan’s primary energy diplomacy effort, the Asia Zero Emission Community (AZEC), and comes with a pledge of $10 billion.

“Japan’s decision to announce such a bold package, despite scrambling itself to secure necessary crude oil and petroleum supplies amid disruptions in the Strait of Hormuz, reflects a clear recognition that Asian economies are deeply interconnected through supply chains,” Takio Yamada, the executive director of the JIIA Center for Global Outreach, said. “Joint efforts to strengthen energy resilience have become indispensable.”

The argument is that by expanding storage and increasing liquidity, the entire region will be able to better withstand supply chain issues. But critics are concerned that POWERR Asia will merely replicate or augment AZEC, the Japanese diplomatic initiative that is aimed at reaching carbon neutrality and focuses heavily on expanding the role of LNG across Asia as a transition energy source – primarily benefitting Japan and its long-term investment in the industry.

To such critics, the lesson from the Hormuz crisis is that relying on any fossil fuels is risky, especially for Southeast Asia. With LNG prices soaring and supplies from the Middle East still largely blocked after six months of war, that message is starting to resonate.

“The reality is, the fossil fuel technologies that Japan is pushing for and the narrative of fossil fuels as energy resilient are starting to crack,” Makiko Arima, the Japan finance campaigner at Oil Change International, told Gas Outlook. “We are seeing more skepticism towards fossil fuel technologies and gas reliance.”

Behind Japan’s Plan

AZEC was launched by Japan’s then-Prime Minister Fumio Kishida in early 2023 as a “platform for cooperation towards carbon neutrality/net-zero emissions in the Asia region.” Its goals have been stated as achieving “net zero emissions through various pathways” and “supporting Asian countries’ economic growth, energy security, and decarbonization.”

Despite that rhetoric, since its formation, reports have found AZEC has been primarily pushing LNG and other linked technologies, like carbon capture or LNG-based blue ammonia or hydrogen co-firing.

POWERR Asia, which stands for Partnership on Wide Energy and Resources Resilience Asia, does much of the same. Its main goal is to provide financial support for procuring alternative crude oil and gas sources, support for expanding stockpiling and infrastructure such as storage tanks, and diversification away from crude oil dependence towards LNG and biofuels.

It also aims to promote two technologies that are not yet commercially viable – next-gen perovskite thin-film solar cells and small modular nuclear reactors.

“Japan is right to push for a regional response to this crisis,” Maria Pastukhova, the program lead for geopolitics and energy security at the nonprofit think tank E3G, told Gas Outlook. “Emergency finance, strategic buffers, supply-chain support, and efficiency measures are all serious parts of that.”

The problem, said Pastukhova, is the central role of LNG.

“LNG is not just risky when markets are tight; it leaves countries structurally exposed to chokepoints, shipping disruptions, supply outages, and price shocks they cannot control,” Pastukhova said.

Regional Response

Since 2023, AZEC has played a role in decisions by countries like Thailand, Indonesia, and the Philippines to expand LNG infrastructure. But the response to POWERR Asia has been mixed.

Part of the reason is that gas dependency was a major reason that Thailand saw huge energy spikes this year that are impacting economic growth, and the Philippines saw rolling blackouts and the declaration of a national emergency. What these countries need are alternatives, not more LNG, says Pastukhova.

“That is not resilience; it is long-term vulnerability dressed up as diversification,” Pastukhova said. “Japan needs to think much more seriously about the kind of regional leadership it wants to show.”

In fact, the past few months have shown signs of a regional shift. In June, the Philippines announced the certification of 13 renewable energy projects worth $5.6 billion, mostly for solar and grid-scale batteries. Meanwhile, one planned project for an LNG-to-power plant in Pagbilao, Philippines, was cancelled in early June due to financial concerns and also a global gas turbine shortage.

Then, in late August, Thailand announced it would be shifting from LNG towards solar due to the negative impacts of the Iran-US conflict. Even Indonesia, which has some gas resources, is seeking alternatives and recently launched a plan to build 100 gigawatts of solar, looking for as much as $62 billion in investment.

“There is skepticism towards what Japan is selling,” Arima said. “The fossil fuel technologies that Japan is pushing for and the narrative of fossil fuel as energy resilient are starting to crack.”

What Arima, Pastukhova, and others would like to see is Japan playing a leadership role helping countries become less dependent on imported oil and gas. POWERR Asia does not do that.

“The lesson of Hormuz cannot be that Asia should deepen dependence on imported fossil fuels like LNG,” said Pastukhova.