IEEJ：October © IEEJ 2022
Special Bulletin
A Japanese Perspective on the International Energy Landscape (606)

October 12, 2022

Importance of Japan’s Energy Security Cooperation with Australia and CanadaKen Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, Japan
Energy market destabilization has been accelerating as energy prices have shot up under theUkraine crisis. As a result, the enhancement of energy security has become a global top priority
challenge. As the current market destabilization is closely linked to dependence on Russia, one of thekey energy security enhancement measures is to phase out dependence on Russia by diversifying
energy sources and supply sources.
In such situation, it has become even more important for Japan to strengthen relations withthe Middle East, the most important import source for oil as the biggest energy supply source for Japan,and secure stable oil supply from the region. It has also become extremely important to beef up
relations with the United States that has rapidly increased its significance under the crisis and can beexpected to further expand oil and liquefied natural gas production. Japan’s relations with the UnitedStates should be enhanced in all areas including energy because the two countries have formed analliance. Japan should strengthen relations with other Asian energy-consuming countries as well as
oil-producing and other resource-rich countries in the world. Japan should also beef up cooperation
with Europe that has great interest in energy security under the Ukraine crisis.
Cooperation with the abovementioned countries is of great significance for enhancing
Japan’s energy security. Given the current geopolitical situation and energy market realities, theenhancement of cooperation with Australia and Canada as well as the abovementioned countries is ofstrategic significance for Japan for the following reasons:First, I would like to point out the political and social stability, democracy, rule of law andother principles in Australia and Canada and the two countries’ long, stable friendly relations withJapan. At a time when the international situation is growing uncertain, with geopolitical tensions rising,it is the most important thing for Japan to enhance strategic cooperative relations with stable, reliable
partners. As a matter of course, political and economic situations and other environments surrounding
Japan and the two countries have been changing continuously. For Japan, however, Australia andCanada with stable democratic social basis and universal values shared by Japan are given priority as
partners in tackling the important challenge of energy security enhancement.
Second, Australia and Canada are growing more important for Japan in the toughgeopolitical environment where the escalating U.S.-China confrontation and the Ukraine crisis aredividing the world. Australia is a member of the Japan-U.S.-Australia-India Quadrilateral Security
Dialogue that is important for the Free and Open Indo-Pacific initiative to which Japan gives priority.
It is significant for Japan to enhance and expand cooperation with Australia in energy and other areas.
The strategic value of the Quad group is expected to increase further in the new situation where theWestern bloc’s confrontation with China and Russia is deepening the divide in the world as Russia,
confronting Western countries amid the escalating Ukraine crisis, is beefing up relations with China1

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as its strategic partner. As Japan seeks to promote cooperation with the AUKUS security partnershipcomprising Australia, the United Kingdom and the United States, Japan’s enhanced relations withAustralia has become even more significant. Canada, though remaining outside the two frameworks,
is one of the Group of Seven industrial democracies and an Asia-Pacific country. As Japan and Canada
share the same position in facing geopolitical tensions and confrontation with China and Russia, theirenhancement of economic and energy security relations may serve their national interests.
Third, I would like to point out the significance of Japan’s energy cooperation with Australiaand Canada. Japan and Australia have already developed important, close and reciprocal relations
regarding coal and LNG investment and trade. Although the future of coal is growing uncertain amid
the enhancement of decarbonization initiatives, Australian coal is well expected to remain importantfor Japan and the rest of Asia. Regarding LNG that has rapidly grown important under the Ukraine
crisis, Australia is likely to retain its presence as an extremely important supplier over a long term. It
also has potential to expand LNG supply in the future. Japan, and Australia and Canada have greatpotential to promote mutual cooperation in the energy area beyond the maintenance and enhancementof their existing relations.
For instance, Canada is expected to increase its presence as an LNG supplier. Canada has
traditionally consumed some part of its domestic gas output and exported the other part to the UnitedStates. However, it has become important for Canada to export its rich natural gas resources to theAsian market including Japan to diversify its export destinations and enhance its Asian business. ForJapan, Canada as a new LNG supplier will be useful for diversifying LNG import sources. If a projectis launched to export LNG from Canada’s West Coast to Japan, Canadian LNG may be competitive interms of transportation costs and strategically more advantageous for Japan than U.S. LNG passing
through the Panama Canal and Middle Eastern LNG passing through the Malacca Straits and the South
China Sea.
However, Japan’s energy relations with Australia and Canada may expand even further. For
instance, Japan may promote cooperation with the two countries in developing CO2-free hydrogen andammonia that would play a key role in Japan’s decarbonization and in formulating relevant supply
chains. CO2-free hydrogen and ammonia may be produced from renewable energy or from natural gas
and other fossil fuels with CO2 emissions captured and utilized/stored. Australia and Canada are
greatly interested in developing supply chains for such new clean fuels and in cooperating with Japanthat has taken leadership in developing the new fuels. Cooperation in the new fuel area will bebeneficial for Japan and the two countries.
Japan’s cooperation with Australia and Canada will also be important in developing rareearths and other critical minerals that are indispensable for energy transition. If energy transition isaccelerated, demand for critical minerals will increase dramatically and their stable supply will
become a key issue. China’s dominant presence in the upstream sector (development and production)and the midstream sector (processing and refining) for critical minerals has become an attentionattracting economic security issue. Australia, Canada and the United States have recognized thesignificance of the issue, attempting to enhance their respective critical minerals development
strategies. Australia is the world’s largest lithium producer. In terms of reserves, it ranks second in theworld in lithium and cobalt and sixth in rare earths. In Canada, the government in March 2021
designated 31 critical minerals and vowed to promote relevant investment and development. For Japan,
it is important to secure stable critical mineral supply for promoting energy transition. Cooperation
with Australia and Canada in this area will contribute to enhancing energy security. Australia andCanada are also major uranium resource holders. Canada ranks third in the world in uranium reserves
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and Australia fourth. However, Russia accounts for more than 40% of uranium enrichment for nuclear
fuel production, indicating that the diversification of uranium supply and nuclear fuel supply chainsand cooperation with Australia and Canada in the diversification are important issues. On the otherhand, Canada has attracted attention regarding the development of a small modular reactor projectwith Japanese involvement.
As indicated above, Japan’s energy cooperation with Australia and Canada has the potential
to become extremely significant from a comprehensive perspective. It is hoped that Japan and the twocountries will further enhance their existing mutual relations and their respective economic and energy
security. To this end, they may have to overcome various political, economic, social and technologicalissues. However, it will become even more important for Japan and the two countries to beef up theirrelations from a strategic perspective in consideration of the tough international situation andgeopolitical environment.
Contact: report@tky.ieej.or.jp
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