Japanese Utilities Increasing Resale of Surplus LNG: IEEFA

An over-contracted position of Japan’s four largest utilities (JERA, Tokyo Gas, Osaka Gas, and Kansai Electric) could increase to almost 12m tonnes in the coming years according to IEEFA.

• Japan’s demand for LNG has fallen rapidly in recent years, marking an important shift in global markets. Japanese utilities are increasingly focused on marketing and reselling the fuel abroad in more direct competition with global suppliers and may add to a global supply glut later this decade.
• Their emphasis on overseas growth is driven by declining opportunities in Japan’s domestic gas market amid higher generation from restarted nuclear facilities and additional renewable energy capacity.
• Utilities with a flexible surplus of LNG are looking to cultivate demand in Asia’s emerging markets. LNG marketers could see sales margins drop and potentially turn negative.
• LNG sales by Japanese companies to third countries have increased from 14.97mt in FY2018 to 38mt in FY2021 according to JOGMEC. The volume of LNG sold abroad is nearly 50% of the volume consumed domestically.