(Bloomberg):Takashi Uchida (Chairman of Tokyo Gas) of the Japan Gas Association, an industry group for city gas utilities, called on the Japanese government to step up its efforts with gas-producing countries to improve the conditions for taking over liquefied natural gas (LNG). Ta.

Chairman Uchida said in an interview in Tokyo on September 30th that, amid uncertain future demand for LNG and the risk of surplus, LNG is being procured through long-term contracts with a “destination clause” that restricts resale to third parties. He said it was difficult to do so. For this reason, he continued, he would like the government to work to have such restrictions lifted.

A destination clause is a clause in an LNG contract that restricts the destination of a ship transporting LNG. Effectively restricting resale has the advantage for the supply side of preventing the customer from competing with the seller.

Regarding destination clauses, after the Fair Trade Commission compiled a report in 2017 stating that there was a possibility of violation of the Antimonopoly Act, domestic electricity and gas companies asked suppliers to relax the clauses. I have been working on this. According to the Japan Energy, Metals and Minerals Corporation (JOGMEC), the proportion of contracts with destination clauses is on the decline, but such restrictions are expected to remain in 40% of Japanese companies’ contracts as of 2030.

bullish qatar

Chairman Uchida said that the reason Tokyo Gas did not renew its long-term contract with Qatar, one of the world’s leading LNG exporting countries, was that the LNG supplied from that country was “not free to choose its destination.” Regarding Qatar’s reluctance to review the destination clause, he continued, “The situation has not changed. We are bullish.”

LNG imports from Qatar increased due to the Great East Japan Earthquake and the Fukushima Daiichi nuclear power plant accident that occurred in 2011, and at one point accounted for just under 20% of total imports, reaching more than 16 million tons annually. Since then, it has continued to decline due to factors such as JERA, Japan’s largest power generation company, not renewing a large long-term contract at the end of 2021, and last year Qatar’s share was only 4.4%. Tokyo Gas’s contract with Qatar also ended in 2021, according to data from BloombergNEF.

Japan’s LNG demand is on the decline due to the restart of nuclear power plants and the spread of renewable energy, and imports last year were down about 25% from their peak in 2014. Although LNG has the lowest greenhouse gas emissions among fossil fuels and is said to be important as a transition energy, the uncertain demand outlook makes it difficult for power and gas companies to renew long-term contracts or create new contracts. situation.

The government began discussions in May to review the “Basic Energy Plan,” a medium- to long-term energy policy that includes LNG. Mr. Uchida pointed out that it would be undesirable in terms of procurement negotiations if the supplier side could see that Japan would no longer buy LNG in the future. In the new energy base, LNG is necessary even in the midst of the trend of decarbonization, and he expressed the idea that it is important for Japan to show “a stance of continuing to use LNG” in the future as well.

At the general meeting to be held in Hiroshima on the 7th of this month by the LNG Importers International Group (GIIGNL), of which he serves as vice-chairman representing Asia, Mr. Uchida will discuss the importance of LNG for security and its necessity in the transition period towards decarbonization. It was also revealed that the two parties are expected to discuss matters such as sexuality.

(Updated to add Mr. Uchida’s remarks)

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