Japanese firms add flexibility with US gas footprint

The unique structure of US LNG projects may attract more upstream investment from Japanese firms, write Tray Swanson and Motoko Hasegawa

Japanese trading house Mitsubishi has this month made its first foray into the US shale gas market, buying upstream assets in the Haynesville basin from US firm Aethon. The purchase marks the fourth and largest Japanese acquisition in US gas since March, after deals by compatriots Tokyo Gas, Jera and Japex, and brings Japanese firms' total investment in US shale gas to $10bn since the start of 2025.

The spending comes after pressure from President Donald Trump to invest in the US. The two countries signed a trade deal in July, lowering the reciprocal tariff rate on Japan to 15pc from 25pc in exchange for $550bn of potential Japanese investment in the US. But more than the direction of US political winds, the primary motivation for each company appears to be their own long-term interests.

The upstream investments reflect the firms' individual assessments of business viability, think-tank the Institute of Energy Economics Japan's executive analyst, Takafumi Yanagisawa, tells Argus. Such decisions are part of a long-term outlook, considering both short-term factors and long-term concerns such as durability through policy changes, he says. While such investments may be seen as a matter of short-term convenience under the lens of US-Japanese relations, allowing the Japanese government to claim compliance under the trade deal, they also chime with Japanese firms' long-held business strategies.

For some of these firms, the investments mark a sizeable expansion rather than an incursion into the US gas value chain. Tokyo Gas subsidiary TG Natural Resources began gathering Haynesville acreage in 2017, and acquired Rockcliff Energy in 2023, raising its Haynesville production to 1.3bn ft³/d (13.4bn m³/yr) at the time. And Tokyo Gas, Jera and Mitsubishi have processing agreements with US LNG export facilities, for which they must procure their own feedgas.

The upstream investments promise stable supply, protecting the firms from the cross-hub basis risk that comes with sourcing gas connected to the US' Henry Hub for shipment to international delivered markets in Asia-Pacific and Europe. The excess gas not destined for liquefaction can be marketed domestically for use in heavy industry and power generation, which holds a particular upside given the US' artificial intelligence-driven data centre buildout.

In Mitsubishi's case, its new Haynesville production complements a comprehensive US gas and power strategy. This includes subsidiaries such as gas marketer Cima, which already handles 5bn ft³/d of midstream supply, as well as power producer Diamond Generation and electricity trading firm BETM.

Upstream hedging

Japan's largest LNG importer, Jera, previously had similar exposure to US power markets but sold its interest in three gas-fired plants in September. Jera bought its first US upstream stake in the Haynesville basin a month later, strengthening its LNG value chain with 500mn ft³/d of production, equivalent to 3.5mn t/yr of LNG. Jera holds a combined 6.5mn t/yr of LNG offtake from US projects due on line by the end of the decade, and plans to double its output to 1bn ft³/d by 2030.

Additional Japanese investments in US shale gas are likely to continue, especially given the unique structure of US LNG projects, Yanagisawa says. In the US, LNG projects are often separated from upstream operations, with different entities involved in supplying gas to each facility. This creates an incentive for companies exposed to US LNG to also invest upstream as a physical hedge for their Henry Hub-indexed LNG supplies. The project structure in other countries requires much larger financial commitments because non-US LNG projects tend to encompass both upstream and midstream value chains, presenting fewer investment opportunities, Yanagisawa says.