Analyst, Gas Group
Institute of Energy Economics, Japan - IEEJ
Head of Gas Group
Institute of Energy Economics, Japan
11:30 - 11:55
Wednesday, 18 September 2019
S2.4 New LNG Strategies Under New Reality
Ongoing unprecedented expansion of LNG production capacity, more diversified supply sources, more potential emerging LNG markets in different countries and regions, end-consuming energy market restructuring, and, even more importantly, downstream market customers' evolving preferences have encouraged LNG buyers, including Japanese city-gas and electric power companies, - and have made little choice available to them but -to change their behaviours and attitudes in the LNG business.
Increasing, more diversified, and more flexible supply sources are expected to be available to also increasing and more diversified LNG buyers, as LNG production projects under construction will be operational and ramp up production in 2019 and 2020 and additional new projects are expected to be sanctioned in the next couple of years. At the same time, energy consumers are becoming more proactive - in Japan, retail customers are shopping around better deals as retail choice programs have been introduced in both city-gas and electric power markets, and in other countries, more consumers are leaning toward cleaner energy sources.
With this background, both the Japanese government and Japanese LNG companies have been developing their respective LNG strategies. After announcing its "LNG Market Strategy" in 2016, the Japanese government have implemented measures to establish a better LNG market - enhancing dialogues with LNG producing and consuming countries alike (including the annual LNG Producer - Consumer Conference), expanding programmes to support LNG project development, and promote flexibility (through the dialogues with different partners and with the JFTC report on destination flexibility).
Changing strategies of companies have been observed through their new initiatives. Several city-gas and electric power utility companies have established individual offices in Singapore to enhance energy trading functions and promote energy infrastructure business in Southeast and South Asia. Many of those companies have made different partnership arrangements at different stages of the value chain, including upstream and LNG liquefaction investment vehicles, LNG trade and optimisation alliance, LNG regasification terminal and power generation joint ventures (in Japan and in other countries), and various retail and wholesale city-gas and electric power marketing arrangements. In parallel with the more globalising trend in the LNG market, even Japanese corporate activities are becoming more cross-regional - they are making deals with American and European counterparts, investing in assets in different regions.
These days such innovative actions are not necessarily limited to the biggest companies. Relatively smaller (but not too small) LNG buyers are also beginning to act more proactively. A city-gas company with its LNG receiving terminal in Central Japan has announced a deal to ship containerised LNG to China. Another city-gas company with its terminal in Western Japan has announced a memorandum with a Russian LNG supplier to consider potential transhipment opportunities at the terminal.
Those initiatives have been motivated, and sometimes forced, by diversified needs that individual companies face under new circumstances (market restructuring and failed activities in the past) and also encouraged by potential opportunities in the global LNG market. Along with further evolutions in the market, additional innovative actions by Japanese players are expected and inevitable.