Petronas, JERA sign 20-year LNG deal amid Middle East supply crisis

Petronas and JERA signed a 20-year LNG supply agreement announced Wednesday in Tokyo by Malaysian and Japanese leaders.reuters
The deal aims to diversify Japan’s energy sources after the Strait of Hormuz closure wiped out roughly 28 million tons of global LNG supply this year, according to the New York Times.nytimes
Japan faces a potential summer power crunch as coal generation has surged and gas-fired output has fallen amid the ongoing Middle East conflict.energyconnects

Japan and Malaysia Sign 20-Year LNG Deal Amid Middle East Energy Crisis

Malaysia’s Petronas and Japan’s JERA have signed a long-term agreement to supply up to 2 million metric tons of liquefied natural gas annually over 20 years starting in 2028, as Tokyo moves to diversify energy supplies away from the volatile Middle East.

The Deal

Petronas announced on Wednesday that its subsidiary Petronas LNG Ltd. will deliver the gas to JERA, Japan’s largest power generation company, extending one of Asia’s longest-standing LNG partnerships into the 2040s. The agreement was announced by the leaders of both countries during a meeting in Tokyo.reuters

The contract adds to earlier supply deals secured by JERA as the company races to reduce its exposure to Middle East energy disruptions. Japan imports roughly 30% to 40% of the LNG it uses for electricity generation, and holds only two to three weeks of LNG feedstock for power at any given time.climatebonds

Middle East Conflict Squeezes Supply

The deal comes against the backdrop of a deepening energy crisis triggered by the ongoing conflict in the Middle East. The closure of the Strait of Hormuz and attacks on Qatar’s LNG export facilities have eliminated approximately 28 million tons of supply from the global market this year, according to the New York Times. That loss accounts for nearly the entire anticipated global supply increase for 2026.nytimes

The disruption has forced Asian economies to turn back to coal. Japan’s 30-day moving average for coal generation was up 17% compared with the same period last year as of May, while natural gas-fired output fell 10%, according to Bloomberg data. Across Asia-Pacific, Rystad Energy projects an additional 70 million tonnes of coal consumption in 2026 under a sustained tight gas market scenario.oilprice

Summer Crunch Looms

Analysts at Japan’s Institute of Energy Economics warned in April that the country risks a power supply crunch if the Middle East crisis persists and LNG shipments remain disrupted as summer air-conditioning demand peaks. The global supply gap is not expected to improve until at least 2028, when a surge in U.S. gas production is projected to introduce new supplies into the market.reuters

The Petronas-JERA agreement signals Japan’s determination to lock in alternative supply routes ahead of that timeline, though the contract’s 2028 start date means it will not ease immediate pressure on the country’s power grid this summer.