TOKYO, Japan — China is on track to surpass Japan as the world’s top buyer of liquefied natural gas, demonstrating Beijing’s economic ascendency and Tokyo’s relative fall. According to Rystad Energy, China’s LNG imports are expected to reach 75.5 million tons this year, edging out Japan’s 75.1 million tons. For the past half-century, Japan has been the world leader in LNG purchases. However, the national market has reached its peak. Japanese utilities and gas companies have shortened LNG contracts for lesser amounts in recent years. Meanwhile, transactions in China are growing in tandem with the country’s economy, with some buyers committing to long-term LNG contracts with large import quantities. China may not overtake Japan for a year or so, depending on how air cooling and heating demand swings with the weather. However, China will eventually overtake Japan. Reduced reliance on imported energy may be viewed as a beneficial development, but it comes with a price. Giving up the top rank also means losing bargaining leverage in a crucial energy sector. Qatar’s 25-year LNG contract with seven Japanese power and gas companies, for example, is slated to expire at the end of the year. By volume, the agreement amounts for almost 10% of the country’s yearly LNG imports. However, because to uncertainties about Japanese demand, negotiations to renew the contract have become complicated. Chubu Electric Power became the first Japanese utility to agree to such a long-term arrangement with Qatar in 1992, just after the Gulf War. Mitsui & Co., a Japanese trading house, and other investors bought modest holdings in LNG joint ventures. Qatar is on its way to become a significant LNG supplier as a result of these connections. Qatar, on the other hand, is now looking for a more lucrative client. “Qatar isn’t really offering Japan good contractual terms,” a Japanese power and gas industry executive said of the current negotiations. To make matters worse, Qatar Petroleum stated in March that it would not extend the Qatargas 1 LNG joint venture, which involves Mitsui and fellow Japanese trading company Marubeni, as well as Exxon Mobil and Total from the United States and France, respectively. In January, Qatar Petroleum will become the sole owner. Japanese trading firms were supposed to supply LNG sales routes to Japanese utilities, but today, according to a source close to the Japanese government, “Qatar is increasingly confident that it will be able to develop and sell LNG on its own.” At the same time, in order to assure energy security, Tokyo has encouraged Japanese firms to acquire resource holdings in other countries. By 2030, the goal is for self-developed petroleum and natural gas to account for 40% or more of total production. However, the unwinding of investments, such as the one in Qatar, might put Japan’s objectives in jeopardy. Establishing a dominant position in the development and production of a natural resource when demand is high in its native market is critical. LNG has become less of a sure bet now that the decarbonization push has spread globally. Because ammonia does not emit carbon dioxide when burned, Japan is leading the way in developing it as a next-generation fuel. Between 2040 and 2050, ammonia has the potential to become a global source of energy. Mitsubishi Corp., a Japanese trading corporation, is looking into a clean ammonia project in Indonesia that would ship the fuel to Japan. The research is being carried out in collaboration with the Japan Oil, Gas, and Metals National Corp., a government-backed organization. According to Hiroki Haba, Mitsubishi’s chief operating officer for next-generation fuels and petroleum, “there is no worldwide production firm yet” for ammonia. “Japan must seize the lead in development and output while it still has the opportunity.” In 1969, Japan began importing LNG and creating a supply network. Natural gas began to supplant oil in electricity generation and became the primary source of gas for domestic usage. Heavy equipment and shipbuilding sectors, for example, grew as a result of the transition. Ammonia has the potential to be a game-changer at this new energy turning point, contributing to Japan’s energy security. It will be critical to put the lessons and know-how learned from more than 50 years of working with LNG to good use./n
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