Japan Gas Lobby urges stronger diplomatic efforts to drop LNG Destination Clauses

The head of Japan Gas Association urged on Friday the government to intensify diplomatic efforts in order to eliminate destination clauses from long-term contracts for liquefied gas. This would allow the government more flexibility in reselling LNG in response to changing demand.

The Japan's Industry Ministry unveiled on Tuesday a draft version of its revised basic policy for energy, which shows that LNG-fired electricity is needed to transition from dirty energy sources to cleaner ones.

The report also stated that the government and private sector should jointly secure long-term LNG agreements to prepare for possible risks, such as price increases and disruptions in supply. Natural gas will remain an important energy source, even after it becomes carbon neutral, because its use as raw material for hydrogen, and other (cleaner) fuels, would increase.

Takashi Uchida, Chairman of the Japan Gas Association, said at a press conference that "the draft met our expectations."

He said that the report highlighted also the need for long-term LNG contracts as well as developing infrastructure such a gas pipelines. This will facilitate negotiations between private companies, gas producing countries, and long-term contracts. It will also help finance and encourage infrastructure investment.

Uchida stated that about half of the long-term LNG contracts Japan holds, as the second largest LNG buyer in the world, still contain destination clauses which limit freedom of resale.

Qatar, for instance, has not yet eliminated destination clauses. "We hope that our government will strengthen its resource diplomacy," said he. (Reporting and editing by Stephen Coates; Yuka Obayashi)

(source: Reuters)