Japan, EU to Sign LNG Trade Accord July 11

Japan and the European Union are to sign a memo of understanding on LNG July 11.

The European Commission said July 10 that it will be signed at its Berlaymont building in Brussels by Japan's minister for economy, trade and industry Hiroshige Seko and EU climate change and energy commissioner Miguel Arias Canete. The signing comes days after leaders at the EU-Japan Summit in Brussels signed two deals July 6 that together are seen as a precursor for a future wide-ranging Japan-EU trade deal.

For the past six years Japanese and EU Commission officials have met and swapped notes on how Japan might counteract the use of restrictive clauses in long-term LNG supply contracts, culminating two weeks ago in a decision by Japan’s Fair Trade Commission earlier this month to ban such clauses in new contracts and to heavily circumscribe them in existing long-term deals.  

The commission noted that, as Japan and the EU together account for nearly 50% of global LNG consumption, “reinforced co-operation between the EU and Japan will promote the liquidity, flexibility and transparency of the global LNG market.”

Data from this year's International LNG Importers Group (GIIGNL) showed that Japan imported 83.34mn mt and EU countries 32.86mn mt in 2016, for a combined total of 44% of total world LNG imports last year of 263.62mn metric tons.

Arias Canete said July 10: "International LNG markets are set for major change with substantial new liquefaction capacity coming on stream. LNG prices across the Atlantic and Pacific basin are converging and the LNG market moves towards higher liquidity and flexibility. For the EU, the current developments in the global LNG market offer an opportunity to let LNG play its full role in diversifying gas supplies to all member states and in enhancing the competitiveness in the internal gas market. Japan is the world's largest LNG importer. Being natural allies in this regard, the EU and Japan both want to promote the liquidity, transparency and flexibility of the global LNG market. This will ensure competitive LNG supplies and make the international market more resilient and prepared to respond to emergencies.”

Mark Smedley