Woodside Energy (ASX: WDS) Signs 10-Year LNG Deal with Japanese Giant JERA

In a significant move that strengthens its position in the global liquefied natural gas (LNG) market, Woodside Energy Group Ltd (ASX:WDS) has signed a 10-year LNG supply contract with Japan’s largest LNG importer, JERA. This long-term agreement highlights Woodside’s growing influence in the energy sector and reinforces its strategic relationship with JERA, which is jointly owned by Tokyo Electric Power and Chubu Electric. 

Contract Details and Strategic Importance 

Starting in April 2026, Woodside will supply approximately six cargoes of LNG annually to JERA. These deliveries will be sourced from Woodside’s diverse global LNG portfolio, with a significant portion expected to come from the Scarborough project in Western Australia. This contract follows JERA’s February 2023 commitment to take a 15.1% equity stake in the Scarborough project, a critical development in Western Australia’s LNG infrastructure. 

For Woodside, the contract represents a key component of its long-term growth strategy, expanding its LNG supply capabilities and solidifying its relationship with one of the largest LNG buyers in the world. Mark Abbotsford, Woodside’s chief commercial officer, emphasized that this is the company’s first long-term LNG sales agreement with JERA from its global portfolio. He also noted that the deal aligns with the core elements of the strategic partnership announced earlier in the year. 

This partnership not only deepens the ties between the two companies but also positions Woodside as a reliable supplier for Japan, a country heavily reliant on LNG imports to meet its energy needs. Japan remains the largest LNG importer globally, and securing a long-term supply contract with JERA strengthens Woodside’s footprint in the crucial Asia-Pacific market. 

JERA’s Role in the Scarborough Project 

JERA’s 15.1% stake in the Scarborough project, announced earlier in 2023, ties the Japanese company closely to one of Woodside’s most important LNG developments. Scarborough, located offshore Western Australia, is expected to produce significant LNG volumes and plays a pivotal role in Woodside’s future production plans. By becoming a part-owner of the project, JERA will not only receive its entitled share of LNG but has also committed to purchasing six additional LNG cargoes per year. 

The Scarborough project is a major contributor to Woodside’s LNG portfolio, with production expected to commence by 2026. The partnership with JERA ensures a steady demand for LNG from Scarborough, providing both companies with greater certainty as they plan for the long-term. 

Woodside’s Expanding Global LNG Portfolio 

Woodside has been aggressively expanding its global LNG portfolio, making strategic moves to strengthen its position in key markets. The contract with JERA underscores the importance of diversification in Woodside’s supply sources. While much of the LNG for JERA will likely come from Scarborough, the contract allows flexibility for Woodside to source from across its global assets, including its North American operations. 

Woodside’s growing North American LNG footprint was recently highlighted when CEO Meg O’Neill and the company’s top management team met with investors at the New York Stock Exchange. The discussions focused on Woodside’s LNG activities in the U.S., including its operations in the Gulf of Mexico. With global demand for LNG rising, particularly as countries transition away from coal and other higher-emission energy sources, Woodside is positioning itself as a leader in the LNG space. 

Global LNG Market Dynamics 

The Woodside-JERA deal comes at a time when the global LNG market is undergoing significant shifts. As countries seek to reduce their reliance on coal and other fossil fuels, LNG has emerged as a key component of the global energy transition. This is particularly true in Asia, where countries like Japan, South Korea, and China are looking to secure long-term LNG supplies to meet growing energy demands while also pursuing lower-carbon energy solutions. 

The LNG market has also been shaped by geopolitical events, including the war in Ukraine, which has disrupted global energy supply chains and led to increased demand for LNG as an alternative to Russian gas in Europe. As a result, LNG prices have been volatile, and long-term contracts like the one between Woodside and JERA provide stability for both buyers and sellers. 

For Japan, a country with limited domestic energy resources, securing reliable LNG supply is critical. The country is heavily dependent on energy imports, with LNG making up a significant portion of its energy mix. By locking in a long-term deal with Woodside, JERA ensures it has access to a stable supply of LNG, helping to meet Japan’s energy needs and support its energy security goals. 

The Role of LNG in Energy Transition 

LNG is expected to play a crucial role in the global transition to cleaner energy. While not carbon-neutral, LNG is considered a cleaner-burning fuel compared to coal and oil, producing fewer carbon emissions when used for power generation. As countries aim to reduce their carbon footprints, LNG is seen as a bridge fuel that can help facilitate the shift to renewable energy sources such as wind and solar. 

Woodside has recognized this trend and is investing in technologies and projects that reduce emissions across its LNG portfolio. The company has also set targets for reducing its carbon intensity and is exploring opportunities in renewable energy and hydrogen. The partnership with JERA, which is also exploring decarbonization technologies, aligns with Woodside’s strategy to supply cleaner energy to its customers while working toward a lower-carbon future. 

Implications for Woodside and JERA 

For Woodside, the 10-year LNG supply contract with JERA provides a significant boost to its LNG sales pipeline and helps secure long-term revenue streams. The deal further cements Woodside’s role as a key supplier in the Asia-Pacific region, one of the largest and fastest-growing LNG markets in the world. As global demand for LNG continues to rise, particularly in Asia, this contract will help Woodside maintain a strong position in the market. 

JERA, as Japan’s largest LNG importer, benefits from securing a stable, long-term supply of LNG, which is crucial for meeting the country’s energy needs. The partnership with Woodside also provides JERA with access to LNG from a diversified portfolio, enhancing its energy security and allowing it to better manage supply risks. 

Bottomline 

Woodside’s 10-year LNG contract with JERA marks a significant milestone in the company’s global expansion and its strategic relationship with one of the largest energy buyers in the world. The agreement ensures a steady supply of LNG from Woodside’s portfolio, with much of it expected to come from the Scarborough project, a key development in Woodside’s future production plans. 

As global demand for LNG continues to grow, driven by the energy transition and geopolitical factors, this long-term contract positions both Woodside and JERA to capitalize on opportunities in the evolving energy landscape. For Woodside, the deal strengthens its presence in the Asia-Pacific region and reinforces its reputation as a reliable global LNG supplier, while JERA secures a vital energy source for Japan’s future energy needs.