Japan - Country Commercial Guide
Liquefied Natural Gas (LNG)

This is a best prospect industry sector for this country. Includes a market overview and trade data.

Last published date: 2022-01-07

Overview

Japan is the largest LNG buyer in the world, importing 74,463,881 tons in 2020, down 3.7% from 2019.  The import dollar value in 2020 reached over $30 billion (3.2 trillion yen) and about 21% of the world’s net LNG imports (356 million tons). Australia, Malaysia, Qatar, and Russia are Japan’s other major sources of LNG imports.

Since the United States began LNG exports in February 2016, 11.0% of its accumulated export volume has been shipped to Japan. The U.S. is growing as an LNG seller and currently is Japan’s 5th largest supplying country. As of May 2021, Japan is the second largest buyer of U.S. LNG.  The purchase of LNG will likely continue be a significant energy policy issue for Japan given its need to secure stable, inexpensive, and relatively clean energy resources.

Current Market Needs

The first half of 2021 saw Japan’s steady recovery in LNG imports, largely due to the critical shortages of electricity which occurred in the winter of 2020-2021.  Here are the latest LNG import volumes in Japan in 2021 and their comparisons against 2020.

LNG Import:

Japan

Jan

Feb

Mar

Apr

May

Jun

2021 (MT)

8,060,001

8,068,874

7,127,493

4,974,637

4,953,048

5,706,614

2020 (MT)

7,512,604

6,642,072

7,208,762

5,196,188

4,579,657

5,261,298

2021/2020

+7.3%

+21.5%

-1.1%

-4.3%

+8.2%

+8.5%

The accumulated import volume by Japan in the first half year of 2021 is 38.9 million tons, an increase of 6.9% from 2020, which was 36.4 million tons and the lowest since 2010. 

In 2020, production fell in all energy sectors such as fuel oils, electricity, city gas, and LPG due to the economic recession caused by the Covid-19 pandemic which brought a reduction in LNG imports.  However, LNG quickly recovered as a major energy source for Japan and supplemented gaps where other energy sources were scarce.

By fiscal 2030, the Government of Japan (GOJ) committed to reduce 46% of its greenhouse gas (GHG) emissions compared to levels in 2013, and Japan aims to become a carbon zero emission society by 2050.  The LNG industry will need to tackle this mission and is under severe scrutiny to comply with Measurement, Reporting and Verification (MRV) mandates to report accurately the amount of GHG emissions produced by LNG exports.  Although some carbon neutral LNG transactions have already started between several key players, it remains to be seen how the carbon neutrality in each business transaction will be scientifically defined and insured.

Recent Market Trends (Japan’s LNG import)

  

2016

2017

2018

2019

 

2020
 

 Local Production 

0

 Exports 

 0 

 Imports (million tons) 

83.34

83.63

82.85

         77.33

           74.46

 Imports (billion $) 

    29.27

36.03

         42.80

         39.80

30.05

Imports from US (million tons) 

0

954,438

2,494,095

 3,695,647

4,721,717

Imports from US (million $) 

-

587

        1,374

        1,806

            2,093

U.S Share (in tons) 

 0.00%

 1.14%

3.01%

         4.78%

6.3%

 Market Size (million tons) 

83.34

83.63

82.85

77.33

74.46

Exchange Rates ($: JPY) 

112.10

108.66

110.40

        109.02

107.00

 

Competitive Landscape

Japan’s LNG Import (2020) 

(tons) 

Australia 

29,102,733 

Malaysia 

10,594,480 

Qatar 

8,734,427 

Russia 

6,140,408 

U.S.A.

4,721,717 

Brunei

     3,961,673

Papua New Guinea 

3,419,367

Oman

2,449,706 

Indonesia

2,226,411

Nigeria

1,359,132

United Arab Emirates

1,034,163 

Peru

626,668

Egypt

63,426

Republic of Korea

 29,570

United Kingdom

 -

 

    74,463,881

 

Best Prospects for U.S. Exporters

CS Japan finds three primary types of market opportunities for U.S. LNG firms in Japan:  (a) Japanese purchase of LNG produced in the U.S.; (b) Japanese investment in U.S. LNG infrastructure; and (c) U.S.-Japan collaboration on third country infrastructure projects that source U.S. LNG.  

U.S. shale-originated LNG exports to Japan began in 2016 allowing the U.S. to rapidly become one of Japan’s most important energy suppliers.  Japan is now expected to import billions of dollars of U.S. LNG over the next five years. These purchases will likely involve the major Japanese electric and gas utilities such as Tokyo Gas, Osaka Gas, Kansai Electric Power Company, and Chugoku Electric Power Company, aa well as JERA, which is Japan’s largest power generation company and the largest single LNG buyer in the world.  Major Japanese trading firms such as Mitsubishi, Mitsui, Sumitomo, and Itochu also play major roles in Japanese and global LNG transactions.

U.S. LNG has three unique strengths. The U.S. firms can offer varieties of business models that are not currently proposed by other countries; the U.S. pricing mechanism is flexible, and not linked with the crude oil price at which most of the Japanese offtakes are bound for purchase under long-term contracts; and U.S. LNG is free from destination clause, which means that a Japanese buyer can easily resell the U.S. LNG to other buyers.

However, as Japan values a diverse supplier base to not become overly dependent on any one supplier or country, Japanese offtakers will be deliberate about changing their sourcing countries, barring unforeseen political events or natural disasters impacting trading partners.  Thus, it remains to be seen how the conservative business practices of securing energy source impacts U.S. companies’ desire to rapidly increase LNG exports to Japan.

Market Entry

Japan’s major LNG importers signed long-term contracts with the Lower 48 States LNG exporters. As of July 2020, five U.S. LNG export terminals - Sabine Pass (LA), Cove Point (MD), Corpus Christie (TX), Cameron (LA), and Freeport (TX) - are all exporting U.S.- originated LNG to Japan.  In addition, many Financial Investment Decisions (FID) were approved (including 3 in the U.S.) in 2019. The Federal Energy Regulatory Commission has approved the construction of many other terminals in the U.S.  What is not clear is whether the current economic disruptions may adversely affect the existing FIDs and previously proposed U.S. LNG projects.

Most of Japan’s LNG imports are under long-term contracts with existing foreign suppliers (see chart from previous page) and these contracts are set to expire by the end of the next decade. The middle and long-term expiration of contracts could open opportunities in the 2020s for the supply of U.S.-made LNG to Japan, either under long-term contracts or in the spot market.

Opportunities

Upcoming Local Trade Event:

LNG Producer-Consumer Conference 2021 (Online, Date: October 5, 2021, PM 7:00-10:00 Japan time, Organized by METI)  https://www.lng-conference.org/english

Resources:

Agency for Natural Resources and Energy (https://www.enecho.meti.go.jp/en/)

Ministry of Economy, Trade and Industry (https://www.meti.go.jp/english/index.html)

Local Industry Resources:

JERA Co., Ltd. 

Tokyo Gas Co., Ltd. 

Osaka Gas Co., Ltd. 

The Kansai Electric Power Co., Inc. 

The Chugoku Electric Power Co., Inc. 

 

CS Japan Contact

Mr. Takahiko Suzuki, Senior Commercial Specialist Takahiko.Suzuki@trade.gov