Japan Gas Lobby Calls for Diplomacy to End LNG Destination Clauses
(Reuters) — The head of the Japan Gas Association on Friday urged the government to enhance diplomatic efforts to eliminate destination clauses in long-term liquefied natural gas (LNG) contracts, ensuring flexibility for resale in response to demand trends.
Japan's industry ministry unveiled a draft of its revised basic energy policy on Tuesday showing LNG-fired power is necessary as a means of energy transition to cleaner energy.
It also said the government and the private sector must jointly secure the necessary long-term LNG contracts in preparation for risks such as price hikes and supply disruptions. Furthermore, natural gas would remain a key energy source even after achieving carbon neutrality, as its use as a raw material for hydrogen and other (clean) fuels would expand.
"The draft met our expectations," Japan Gas Association Chairman Takashi Uchida told at a news conference.
The report also highlighted the need to secure long-term LNG contracts and develop infrastructure such as gas pipelines which will help negotiations between private companies and gas-producing countries for long-term contracts, facilitate financing, and encourage investment in infrastructure, he said.
About half of long-term LNG contracts held by Japan, the world's second-biggest LNG buyer, still have destination clauses, limiting freedom of resale, Uchida said.
"Qatar, for example, has yet to eliminate destination clauses. So, we hope our government will conduct stronger resource diplomacy," he said.
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