Tue Oct 01 03:25:03 UTC 2024: ## Japan’s LNG Buyers Seek Government Aid to Negotiate Flexible Contracts

**Tokyo** – Japan, a major importer of liquefied natural gas (LNG), is facing challenges in securing flexible supply contracts, according to the head of the Japan Gas Association, Takashi Uchida. He argues that the government’s assistance is necessary to negotiate better terms with suppliers.

The issue stems from so-called “destination clauses” which restrict the resale of LNG shipments, making it difficult for Japanese companies to commit to long-term contracts in a market with uncertain future demand. These clauses are common in contracts with major producers like Qatar, who aim to maintain market control and prevent resales from dampening demand elsewhere.

Uchida, who is also chairman of Tokyo Gas Co., believes that the private sector alone cannot secure flexible agreements and is calling for government intervention to help negotiate contracts without destination clauses.

Japan’s reliance on LNG is substantial, with two-thirds of its consumption used domestically and the remaining third resold abroad. However, despite a shrinking population, the country is foreseeing increased electricity demand due to factors like data centers and the development of artificial intelligence, leading to a continued need for stable energy sources.

While Japan has diversified its LNG sources beyond Qatar to Australia and the US, the majority of long-term contracts are still expected to include destination clauses in 2030. This could pose challenges in a future where the demand for LNG as a backup for renewable energy and for energy security is expected to grow.

The International Group of LNG Importers (GIIGNL), meeting in Hiroshima next week, will focus on the future role of LNG in addressing energy security, transport, and renewable energy back-up. The importance of the fuel, once considered a “stranded asset,” has been highlighted by the recent global energy crisis, driven by the war in Ukraine.

Japan’s energy policy is currently under review, with the government aiming to set a new strategic energy plan that will define the country’s energy mix beyond 2030. The need for flexible LNG contracts is becoming increasingly critical as Japan seeks to balance its energy needs with its climate change goals.

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