Overview
Japan is the largest LNG buyer in the world, importing approximately 83 million (82,853,829) tons in 2018, down   1% (778,015 tons) from 2017.  Its import dollar value in 2018 is approximately $42.8 billion (4.7 trillion yen) and represents approximately 27% of the world’s total LNG trade transactions (310~320 million tons ≈ 421.6 Bcm³).  Australia, Malaysia, Qatar, Russia and Indonesia are Japan’s major LNG sourcing countries.
 
Since the United States began its LNG export in February 2016, 9.6% of its accumulated volume has been shipped to Japan.  The U.S. is growing rapidly as a leading LNG seller and currently is Japan’s 10^th largest supplying country.  Japan is the 3^rd largest buyer of U.S. LNG, after South Korea and Mexico.  LNG will likely continue be a significant policy issue for Japan given its need to secure stable, inexpensive, and relatively clean energy resources. 

Current Market Needs
The Japanese LNG market is currently saturated and generally comfortable with having obtained the LNG volume it requires.  In the early 2020’s, however, it is possible that we will see tightening of the supply-demand balance, which will likely trigger an upsurge of spot prices.  Such a tightening situation, according to a Japanese energy thinktank, derives from a sluggish Financial Investment Decision (FID) market in the recent past, in addition to the growing LNG demands from emerging countries such as China, India, Pakistan and Bangladesh.  Yet, Japanese offtakers indicate that they are well prepared for the possible shortage and are confident in securing their required volume in mid and long-term, in part because they believe that many FID prospective projects exist for the offtakers to secure their future needs.    

Recent Market Trends (Japan’s LNG import)

Best Prospects for U.S. Exporters

CS Japan believes that there are three primary types of market opportunities for U.S. LNG firms and interests in Japan, such as (a) the Japanese purchase of LNG produced in the U.S.; (b) Japanese investment in U.S. LNG infrastructure; and potentially (c) U.S.-Japan collaboration on 3^rd country infrastructure projects that source U.S. LNG. 

(a) Japanese Purchase of LNG produced in the U.S.
In May 2018, the first shale gas-derived LNG cargo, which was produced by Cove Point LNG from Maryland, arrived at a facility in Yokohama.  This was also the first long-term contracted U.S. shipment to Japan with the participation of Japanese companies such as Tokyo Gas Co., Ltd. and The Kansai Electric Power Co., Inc.  Not having imported substantial U.S.-produced LNG in the recent past, Japan is now expected to import billions of dollars of U.S. LNG annually, which has the benefits of having no destination restrictions and not being linked to crude oil prices. The purchases will likely involve the major Japanese electric and gas utilities, with JERA expected to be the largest importer, as well as major Japanese trading firms such as Mitsubishi Corporation, Mitsui & Co., Ltd. and Sumitomo Corporation.  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.  It remains to be seen how the conservative business practices of securing energy source impacts U.S. companies’ desire to increase LNG exports to Japan.

b) Japanese Investment in the U.S. LNG Infrastructure
Japanese companies are considering further investments in U.S. power plants and gas liquefaction export facilities.  Such infrastructure investors would again include electric and gas utilities, as well as major trading companies.  Being eager to continue its overseas involvement in the LNG value chain, how much of Japan’s investment will be made in the U.S. versus other countries will be of key interest.

(c) U.S.-Japan Collaboration on 3^rd Country Infrastructure Projects that Source U.S. LNG
Having already committed $10 billion in 2017 to support LNG supply chain projects and provide 500 developing country officials with LNG training, Japan’s economic minister Seko made further commitments in October 2018 to expand the LNG market an additional 50 million tons by providing financial support to emerging LNG liquefaction projects.  Being the first country that developed LNG, Japan also announced it will support development of safety and technology standards, regulations and master plans to other LNG consuming countries.

Market Entry

Japan’s major LNG importers have signed long-term contracts with the Lower 48 States LNG exporters such as Dominion Energy, Sempra LNG & Midstream, and Freeport LNG.  2 U.S. projects such as Sabine Pass (owned by Cheniere Energy) and Cove Point (Dominion Energy) began their LNG export to Japan in 2018, and more export projects are expected to materialize in 2019. 
Most of Japan’s LNG imports are under long-term contracts with existing foreign suppliers, and these contracts are set to expire by 2021/2022. The mid 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

LNG Producer-Consumer Conference 2019
September 26, 2019

Tokyo
Ministry of Economy, Trade and Industry (METI), Asia Pacific Energy Research Centre (APERC)

Gastech Exhibition & Conference 2019

September 17-19, 2019
Houston, Texas
DMG Events

Web Resources
Agency for Natural Resources and Energy 

CS Japan Contact
Mr. Takahiko Suzuki, Senior Commercial Specialist
Takahiko.Suzuki@trade.gov