Japan will take added measures to ensure the country is insulated from LNG supply shocks, Reuters reported on November 7 citing two industry ministry sources.

It marks a change in posture for the world’s second biggest importer of the super-chilled fuel, which typically only purchases cargoes during peak demand periods.

However, with LNG prices having been incredibly volatile over the past few years, Japanese officials have decided to purchase LNG cargoes for emergency reserves beginning in January on a monthly basis.

Consequently, one cargo per month, which is about 70,000 tonnes of LNG, will be purchased to stockpile the super-cooled gas under Japan’s Strategic Buffer LNG program, overseen by the Ministry of Economy, Trade and Industry.

The decision will significantly raise the supply of LNG procured by Tokyo. Purchasing 12 cargoes will bolster the stockpile by 840,000 tonnes. The last two years, the emergency reserve had about 210,000 tonnes added to it each year.

Without an emergency, the cargoes may be used or resold, highlighting Japan’s increasing push into the LNG resale market, which it has ramped up in recent years, bolstered by a well-established value chain in reselling, marketing, and shipping.

With an increased use of renewable energy and nuclear power, Japan has been leaning into the LNG resale sector in recent years, and the country’s biggest LNG importer JERA, has been stockpiling cargoes for the past two winters.

Under the terms of the program, JERA holds cargoes for the Strategic Buffer until 18 days before arrival in the ports. Profits are given back to the government, while Tokyo also covers resale losses.

Indeed, the program offers further protection against price spikes, which could emerge due to geopolitical conflicts, blocked shipping routes, or spiked domestic demand due to nuclear reactor failures.

Japan typically purchases in the ballpark of 70-75mn tonnes per year (tpy) of LNG, with natural gas comprising approximately 35-40% of Japan’s power generation mix.