Japanese energy firm JERA has inked a 20-year sales and purchase agreement with Malaysia’s state-run Petronas, the Tokyo headquartered company announced on June 10.

The deal will see JERA purchase up to 2 mn tonnes per year (tpy) of the super-chilled fuel beginning in 2028 from Petronas, with the majority of the LNG sourced from Malaysia.

JERA, which is one of the world's biggest LNG buyers, has a long-standing business relationship with Petronas that spans over 40 years. The newly signed agreement comes on the back of a memorandum of understanding inked between the two firms in June 2025 to explore expanding collaboration throughout the LNG value chain.

Japan has been on a quest in recent months to reduce its vulnerability to external shocks in the LNG market and limit the impact of price spikes in the wake of the conflict in the Middle East between Israel, the US, and Iran that has sent LNG prices skyrocketing.

Japan was hit hard by the surge in LNG prices in 2022 following Russia’s invasion of Ukraine, when the value of LNG imports climbed by 65% in US dollar terms, and 98% in yen, despite a 3% drop in volumes, according to data from the Institute for Energy Economics and Financial Analysis (IEEFA).

Keen to avoid a repeat, Tokyo has been seeking to diversify its LNG suppliers. However, rising LNG costs are still likely to feed through to wholesale power markets and retail tariffs.

By securing LNG sourced from Malaysia, Japan is hoping to add more stability to its LNG supply, while also giving greater flexibility to react to seasonal fluctuations in demand for LNG, such as during the summer months when more LNG is needed for air conditioning.

Furthermore, as Japan is ramping up its use of renewables as it pushes to be net-zero by 2050, increasing supply of LNG is seen as critical for Tokyo to have flexibility in fuel supply.