TOKYO -- Mitsui & Co. will take a 10% interest in a $5.5 billion liquefied natural gas project in the United Arab Emirates, the Japanese trading house said Thursday, gravitating back toward the region where it got its start in the field.


The Ruwais project, slated to begin operation in 2028, has a planned annual production capacity of 9.6 million tonnes. It is led by Abu Dhabi National Oil Co., which owns 60%, with Shell, BP and TotalEnergies among the other investors. The plant will be designed and built by a joint venture between Japan's JGC Holdings, France's Technip Energies and UAE-based NMDC Energy.


Mitsui's $550 million investment will lift its equity share of LNG production across all its projects to 9 million tonnes annually from about 8 million tonnes. Middle Eastern countries will account for 2.2 million tonnes, edging past the U.S. to become the top region.


The UAE is where Mitsui first got involved in LNG in the 1970s. "We are delighted to participate in this project as a result of our 50 years of cooperation with ADNOC," CEO Kenichi Hori said.


The trading house sees LNG as a realistic option for the transition to clean energy, and the fuel is positioned as a key target area in its medium-term plan running through fiscal 2025.


Although Mitsui has been looking for new LNG projects to join, Ruwais will be the first in five years.


It has yet to start procuring gas from the Arctic LNG 2 project in Russia that it bought into in 2019, due to U.S. sanctions over the invasion of Ukraine. Construction on a project in Mozambique that the company joined that year has halted amid an insurgency, and the start of production is expected to be pushed back beyond the previous mid-2024 estimate.


As mounting geopolitical risks leave a relatively limited group of stable LNG suppliers, including the Middle East, Canada and Indonesia, the UAE project has become all the more important for Mitsui.


It is significant for Japan as a whole as well. The allocation of LNG produced at Ruwais will be negotiated by the companies involved, rather than determined by their respective ownership stakes. While Mitsui's share starts at 600,000 tonnes, Japan could end up with more than the 960,000 tonnes from the trading house's 10% equity stake.


Japan's supply of LNG from the Middle East has declined due to developments including JERA deciding in 2021 not to renew a long-term supply contract with Qatar for more than 5 million tonnes a year. The country's top LNG supplier last year was Australia, followed by Malaysia, Russia and the U.S., with no Middle Eastern countries in the top five.


Although LNG projects are facing headwinds from decarbonization efforts in general, the fuel is still at the center of a global scramble for energy sources. Demand is growing in China, South Asia and Southeast Asia for a fuel that is less carbon-intensive than coal. Shell forecasts global demand growing by more than half from 2023 to between 625 million tonnes and 685 million tonnes in 2040.


The European Union is also growing somewhat open to natural gas, adding the fuel last year to its taxonomy of environmentally sustainable economic activities if certain conditions are met, including a limit on lifecycle emissions from production to consumption.


The plan is to use renewables and nuclear energy to power core facilities at Ruwais, which would substantially reduce carbon emissions compared with other LNG plants.