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The European Commission says it wants to boost investments in overseas LNG projects to secure stable energy supplies, touting the benefits of the “Japanese model” that relies on state export finance institutions. But experts have queried how the EU would finance the strategy.  

The ambition is included in the Affordable Energy Action Plan, published last week. The Commission said the initiative would stop high energy prices from “hurting EU citizens and businesses” and lead to annual savings of €260bn annually by 2040.  

The plan includes reforms to the bloc’s grid systems and electricity markets, faster permits for renewable energy, and measures aimed at ensuring “well-functioning gas markets”.  Action plans are an indication of the Commission’s intent, rather than legislative proposals that require approval of member states or the European Parliament.  

Russia’s full-scale invasion of Ukraine in early 2022 triggered a jump in gas prices, as the EU and its 27 member states swung away from Russian pipeline gas and towards seaborne LNG imports.  

Across the EU, governments are increasingly concerned that manufacturers – such as German carmakers – are struggling to compete with foreign rivals that have access to cheaper energy sources.  

“EU gas wholesale prices have not fully reverted to pre-crisis levels and are on average nearly five times those in the US, as compared to double to triple before the [Ukraine] crisis,” the Commission says.  

The EU could also seek to mimic the “Japanese model” of investing in foreign LNG projects to secure off-take agreements, the plan says.  

“[Japan] has a longstanding policy of supporting investments in export infrastructure in countries producing liquefied natural gas,” the Commission says. 

“With the EU’s competitiveness, geopolitical considerations and climate goals in mind, the EU and/or member states could also accompany EU importers in investing directly in export infrastructure abroad, providing preferential loans to private investors,” it adds.  

Since the Fukushima nuclear disaster in 2011, Japan has become increasingly reliant on gas for its energy needs and pumped billions of dollars into LNG projects globally – often through state agencies such as the Japan Bank for International Cooperation (JBIC) – to secure long-term supplies.  

Last year, JBIC extended a US$1bn loan for Australia’s Scarborough Energy Project and said it would help secure gas for the Japanese market.  

That came after a December 2021 deal for the Barossa LNG project near Darwin, with JBIC and a group of banks providing US$497mn to develop the gas field.  

In 2014, it also struck a US$2.6bn project financing loan agreement to support the Freeport LNG in Texas.  

If the Commission’s plan is put into action, the EU may look to the Middle East and Africa for project opportunities, but the US would be the “main target”, says Ana Maria Jaller-Makarewicz, lead energy analyst for Europe at the Institute for Energy Economics and Financial Analysis (IEEFA).  

However, she tells GTR there are question marks over which financing institutions the EU would use. 

“Both the European Investment Bank (EIB) and the European Bank for Reconstruction and Development have already said they are going to focus more on renewables and phase out fossil fuel infrastructure,” she says.  

“Will everything change? Will these banks suddenly decide they are going to do it [finance LNG]?”  

Laurie van der Burg, public finance campaign manager at Oil Change International, says the Japanese model relies heavily on public financial institutions like JBIC, typically with co-financing by commercial banks MUFG, Mizuho and SMBC. 

She argues that any attempt to copy the Japanese model would undermine climate pledges made by the EU and member states, including Spain, Sweden, Denmark, the Netherlands and France – all of which have adopted “strong policies” to end international public finance for fossil fuels.  

In 2021, several countries and institutions such as the EIB signed onto the Clean Energy Transition Partnership. Many major EU export credit agencies have also largely ended backing for fossil fuels, including gas, since 2021.  

“This initiative has helped to bring down international public finance for fossil fuels by two-thirds, or US$15bn a year. If the EU were to follow Japan’s example it would risk unravelling the hard-won progress in shifting public finance out of fossil fuels in support of climate, energy security and affordability goals,” van der Burg says.  

The Commission says that under its plan, it will start harnessing the EU’s purchasing power to get a “better deal” on imported natural gas by the second half of 2025 and will work with international partners to do so. 

“Protecting EU buyers against price volatility of fossil fuels could lead to a significant short-term reduction in retail prices,” it says.  

But climate campaigners are hopeful the proposals will be challenged by the European Parliament and member states.  

“These long-term LNG contracts and investment plans are not a done deal,” van der Burg tells GTR.