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: 2020-10-30

Overview

Japan is the largest LNG buyer in the world, importing approximately 77 million (77,327,079) tons in 2019, down 6.6 % (tons) from 2018. Its import dollar value in 2019 is approximately $39.8 billion (4.4 trillion yen) and shares approximately 23.4% of the world’s net LNG imports (330 million tons ≈ 467.9 Bcm³). Australia, Malaysia, Qatar, Russia and Brunei are Japan’s major LNG sourcing countries.

Since the United States began its LNG export in February 2016, 10.3% 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 8th largest supplying country. As of May 2020, Japan is the 3rd 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

We noted in the last Country Commercial Guide that the Japanese LNG market had been saturated and generally comfortable with having obtained the LNG volume it requires.  Here are the latest LNG import volumes in Japan in 2020 and their comparisons against 2019.

LNG Import:

Japan

Jan

Feb

Mar

Apr

May

Jun

2020 (MT)

7,512,604

6,642,072

7,208,762

5,196,188

4,579,657

5,261,298

2019 (MT)

7,546,925

7,350,347

7,295,236

5,626,846

5,567,682

5,200,073

2020/2019

0.5%

9.6%

1.2%

7.7%

17.7%

+1.2%

 

The accumulated import volume by Japan in the first half year of 2020 is 36.4 million tons, which is the lowest since 2010.  Production has fallen 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 has also created considerable reduction in LNG imports. Officials at the Government of Japan’s Ministry of Economy, Trade and Industry (METI) told us, however, that the prospects were not as bad, noting that the decline of LNG imports in Japan has not been as severe as in other countries. Still, Japanese LNG imports have been shrinking for some time, with 2019 (77.33 million tons) 6.7 % down from 2018, which was then the lowest since 2010. It is too soon to tell how the Covid-19 pandemic will affect Japan’s LNG imports and overall energy plan in the future.

Recent Market Trends (Japan’s LNG import)

 

2015

2016

2017

2018

2019

Total Local Production

0

0

0

0

0

Total Exports

0

0

0

0

0

Total Imports (million tons)

85.04

83.34

83.63

82.85

     77.33

Total Imports (billion $)

 45.55

29.27

 36.03

42.80

39.80

Imports from US (million tons)

157,119

0

954,438

 2,494,095

3,695,647

Imports from US (million $)

62

-

587

 1,374

1,806

U.S Share (in tons)

 0.18%

 0.00%

1.14%

3.01%

4.78%

Total Market Size (million tons)

85.04

83.34

83.63

82.85

77.33

Exchange Rates ($: JPY)

121.05

112.10

108.66

110.40

109.02

 

Competitive Landscape

Japan's LNG Import (2019)

(tons)

(thousand yen)

Australia

30,116,008

1,756,177,031

Malaysia

9,330,527

492,022,088

Qatar

8,734,971

510,420,743

Russia

6,398,638

337,528,306

Brunei

4,320,630

248,174,455

Indonesia

4,153,037

243,067,415

Papua New Guinea

3,741,745

216,672,924

U.S.A.

3,695,647

196,835,711

Oman

2,894,035

144,333,845

United Arab Emirates

2,168,486

123,767,579

Nigeria

 833,291

32,436,813

Peru

 677,128

36,467,369

China

70,560

2,250,297

Equatorial Guinea

68,819

3,623,685

Egypt

62,119

3,495,559

Algeria

61,438

2,505,334

 

    77,327,079

4,349,779,154

 

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 3rd country infrastructure projects that source U.S. LNG.   Of the three, we regard the first opportunity as most relevant for the U.S. exporters.

U.S. shale-originated LNG exports to Japan began in 2016, and the U.S. is rapidly becoming 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. The 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, and 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 as well as 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 to purchase under the long-term contracts; and the 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. 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 have 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 exporting U.S.- originated LNG to Japan.  In addition, there were many Financial Investment Decisions (FID) 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.  It is not clear yet whether the current economic recession may adversely affect the existing FIDs and proposed U.S. LNG projects in 2020.

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 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

Upcoming Local Trade Event:

LNG Producer-Consumer Conference 2020 (Online, Date: October 12, 2020, PM 7:00-10:00 Japan time, Organized by METI)       https://www.meti.go.jp/english/press/2020/0710_001.html

Web Resources

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

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

Local Industry Resources:

JERA Co., Ltd. https://www.jera.co.jp/english/corporate/

Tokyo Gas Co., Ltd. https://www.tokyo-gas.co.jp/en/aboutus/businesses.html

Osaka Gas Co., Ltd. https://www.osakagas.co.jp/en/aboutus/our_businesses/

The Kansai Electric Power Co., Inc. https://www.kepco.co.jp/english/

The Chugoku Electric Power Co., Inc. https://www.energia.co.jp/e/index.html

CS Japan Contact

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