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Japanese utilities look to sell surplus LNG abroad as nuclear and RE generation rise

LNG demand could fall between 25.7 and 31.6 million tonnes per annum.

Gas and power utilities in Japan are marketing and selling their surplus liquified natural gas (LNG) purchase commitments to other markets due to a decline in demand as nuclear and renewable generation, on the back of climate targets, continue to grow.

In a report, the Institute for Energy Economics and Financial Analysis (IEEFA), said the government’s climate energy plans expect LNG-fired power generation to decline by over a half by 2030.

As such, IEEFA said the country’s LNG demand could fall between 25.7 and 31.6 million tonnes per annum (mtpa) or around a third of 2019 levels if electricity generations are attained.

The country’s largest utilities such as JERA, Tokyo Gas, Osaka Gas, and Kansia Electric will have an over-contracted position of around 11 million tonnes per annum over the decade.

“The importance of Japan’s shift into LNG resales and marketing should not be underestimated,” says Sam Reynolds, the report’s co-author and LNG research lead at IEEFA. “Rather than absorbing more volumes from the global market, Japanese companies may increasingly find themselves in direct competition with global suppliers for potential customers in emerging markets.”

Data from the JHapan Oil, Gas and Metals National Corporation showed that Japanese companies’ sales to third countries surged to over 38 million tonnes (mt) in FY2021 from 14.97 mt in FY 2018.

Utilities are also investing in midstream and downstream gas infrastructure such as regasification terminals and LNG-fired power plants in South and Southeast Asia due to limited growth prospects in the local gas market.

The government targets companies to transact 100 mtpa of LNG by 2030, higher than the 79 mtpa that have already been contracted.

“As domestic demand falls faster than LNG purchase commitments, Japanese utilities will face an important choice,” says report co-author Christopher Doleman, an IEEFA LNG specialist. “Either they can resell flexible cargoes abroad or exercise contractual volume flexibilities and cancellation rights, which may incur additional costs.”


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