Connect with us


Japan’s pivot from importer to global LNG marketer raises industry eyebrows

Japan shifts from top LNG importer to global marketer amid falling domestic demand, aiming to lead in emerging markets despite industry challenges.



Anegasaki LNG power plant -(Photo: JERA)

In a remarkable turn of events, Japan, historically the world’s largest importer of liquefied natural gas (LNG), is seeing a drastic decline in domestic demand for the fuel. This shift has led the country’s leading gas and power utilities to look overseas for market opportunities, as highlighted in a comprehensive report by the Institute for Energy Economics and Financial Analysis (IEEFA).

The report details a projected surplus of approximately 11 million tonnes per annum (mtpa) in LNG purchase commitments among Japan’s utility giants, such as JERA, Tokyo Gas, Osaka Gas, and Kansai Electric, looming over the current decade.

With the domestic gas market growth stalling, these companies are venturing into international markets, notably in South and Southeast Asia, investing in critical infrastructure to boost LNG demand abroad.

Sam Reynolds, co-author of the report and LNG research lead at IEEFA, emphasizes the significance of this strategic shift. “Japanese companies, transitioning from major LNG importers to aggressive marketers, might now vie with global suppliers for dominance in burgeoning markets,” he states.

Japanese utilities are adjusting to a new reality where their home market shrinks due to increased nuclear and renewable energy generation, ambitious energy and climate targets, and demographic trends.

Since 2017, these utilities have also seen a dip in market share, spurred by the liberalization of gas and power sectors.

Compounding this, government policies and corporate strategies are realigning towards reducing LNG-fired power generation by more than half by 2030. This could lead to a drop in Japan’s LNG demand by about one-third of its 2019 levels, with imports already down 22 mtpa since 2014.

Christopher Doleman, another co-author and an LNG specialist at IEEFA, notes that Japanese utilities are at a crossroads. They must decide whether to sell excess LNG abroad or negotiate within their contracts, possibly incurring additional costs. “This decision is critical in the context of Japan’s Ministry of Economy, Trade, and Industry (METI) targeting 100 mtpa of LNG transactions by 2030,” Doleman explains.

The anticipation of a global LNG oversupply and potential price drops presents both opportunities and challenges for Japanese LNG marketers.

The situation is further complicated by the fact that many of Japan’s LNG purchase agreements are tied to oil price indices, which could be disadvantageous if spot LNG prices fall.

Experts warn that Japan’s evolving role in the global LNG market could exacerbate an impending surplus, especially as new liquefaction projects come online. This shift could lead to tighter margins for LNG resales and underscore the financial risks associated with LNG trading.

Share this post via:
Continue Reading
Click to comment
Notify of
Inline Feedbacks
View all comments