Not an expert on this format but the log states:

C:\Projects\Etosha e Okavango\Satelites\EO8-EO10_EO14_EO17.aux' exists but could not be opened. File contents may be invalid, or the file format may not be supported

Can you somehow check if that file is ok using different software? Does FME read it when you rename or remove the file? Just to narrow down the issue.

The fie is ok. I have checked it with both QGIS and ArcMap. The .aux file contains some metadata for the .jp2 file so it shouldn't be an issue not opening it. I have the impression that the problem is not enough RAM because the .jp2 file is quite large and if I use a smaller one it works. I will try it on a different computer with more RAM and maybe it will make a difference.

this looks to be FME 32 bit - Do you have access to FME 64 bit? If it's memory as you suspect then FME 64 bit should help. 32-bit FME can only really use 4GB of RAM so having 16 doesn't really matter

I do not have access to the 64 bit version. I have tried opening smaller jp2 files and they work so I assume the problem is with the size of the file.

yeah - too bad. 32 bit FME is no longer supported so whoever is doing your IT should really change: https://community.safe.com/s/article/FME-32-bit-Windows-Continued-Support

Thank you! I asked someone that has the 64 bit version to check it for me and it works. So I guess I need to update...