Data Center Construction Boom Could Mean Growth for Japan’s Natural Gas Infrastructure
Eugene Gerden, International Correspondent
(P&GJ) — Due to increasing energy demand, Japan continues to actively develop its domestic pipelines infrastructure. Japan expects a sharp growth in demand for power and energy in the coming years, thanks to the booming sectors of artificial intelligence (AI) and semiconductor chips. This is despite generally stagnant consumption from the Japanese population. In addition, the ongoing trade disputes with the U.S. has put additional pressure on the country’s economics, limiting active growth.
Regardless, most local economists expect the demand for natural gas in the country will remain high in the second half of 2025 and into 2026. Elevated consumption rates will require stable gas supplies and reliable pipeline infrastructure to distribute supplies to demand centers.
Currently, Japan’s dependence on natural gas remains high, largely due to the Fukushima nuclear accident, which resulted in the closure of all nuclear plants in the country.
While Japan has some gas production, it is extremely limited, placing the reliance on imports at 90% or higher. Currently, domestic natural gas is produced from gas fields in Hokkaido, Nigata and a few other regions in the country. In Japan, 63% of natural gas is used to generate electricity, while 29% goes for general energy consumption and 8% is used by for various industrial sectors.
Due to its location and the configuration of its islands, nearly all of Japan’s gas imports are in the form of LNG, which is imported from > 35 LNG import terminals around the world, with Australia being the largest supplier. Although Japan has initiated an energy diversification policy, the nation’s government has made the development of a domestic gas transmission system a priority project.
In addition to domestic pipeline projects, great attention is being paid to finding additional overseas supplies. One such project is the Alaska LNG project in the U.S. The $44-B Alaska LNG development project involves the construction of an 807-mi (1,300-km) natural gas pipeline that would transport gas supplies from Alaska’s North Slope field to a 20-MMtpy liquefaction facility in Kenai. If built, exports are scheduled to begin in 2030. Because of Alaska’ proximity to Japan, it offers a direct export outlet for U.S. gas supplies to the island nation.
Domestic infrastructure. The development of gas pipelines infrastructure is also ongoing within the Japanese territory. At the end of 2024. Inpex Corporation, Japan’s largest exploration and production company, announced the completion of its fifth stage extension of the Shin Tokyo Line natural gas trunk pipeline. The pipeline began supplying natural gas to the northern Kanto region of Japan, where natural gas demand is expected to grow steadily.
At the time of this publication, there is no single gas transmission system operator (TSO) in Japan. Local gas networks were developed separately, without connections, usually built close to LNG terminals. As a rule, each gas company operates in its own distribution area. This type of structure (in which all customers, including households, can choose their utilities) was the result of deregulation and liberalization policies implemented by the government in the early 2000s.
Part of the plans of the Japanese central government and the authorities of major provinces is to focus on implementing various interconnection projects in its natural gas sector, which should increase the efficiency of the current system. Technical implementation of these plans is fraught with difficulties, as Japan’s mountainous terrain makes it difficult to connect the fragmented networks.
Regardless, Japanese authorities plan to continue to support the construction of natural gas pipelines across the nation by relaxing existing regulations and providing support to service providers.
Regarding local gas operators, the two biggest companies are Japan Petroleum Exploration Co. Ltd. and INPEX Corp., which are major natural gas producers and have independent networks of high-pressure pipelines, stretching > 500 miles (800 km) and 930 miles (1,500 km), respectively.
According to the International Energy Agency, Japan’s gas pipeline network runs 162,281 mi (261,167 km). Approximately 86% of this infrastructure is within low-pressure grids for local distribution, while only 0.9% are high pressure. Most local pipelines are owned and operated by electricity utilities and city gas companies, which usually expand their networks from their own sources without significant state support.
There are also options for third-party access to trunk pipelines and distribution networks. However, the lack of interconnections between regions and entities in Japan significantly limits competition.
There is also growing interest for the development of hydrogen (H2) pipeline infrastructure in Japan. This interest is a direct result of the nation’s $20.3-B initiative to develop the country’s domestic H2 sector. The development of H2 pipeline infrastructure is part of Japan’s Contract for Difference (CfD) subsidy program, which provides domestic producers and importers of low-carbon H2 subsidies and other support from the state. In general, the development of the H2 sector is important for Japan, given the country’s strategy for diversification of energy supplies and its announced plans to achieve carbon neutrality by 2050.