Japan, EU to Work on Removal of LNG Resale Restrictions

Two of the biggest global LNG consumers, Japan and the European Union, have agreed to work together to make the LNG market more liquid, flexible and transparent.

The two parties signed a memorandum of cooperation July 11 to undertake joint activities aimed at improving the functioning of the global LNG market. These include increasing flexibility in contracts for LNG sales and purchases, and enhancing the organisation of gas hubs in consumer markets, price transparency and reporting. They will also enhance their coordination in international fora and organisations in the area of energy, in particular regarding responses to unexpected gas market disruptions. 

“A more liquid, transparent and flexible LNG market will contribute to the diversification of gas supplies in Europe. This will not only strengthen our energy security, but will also lead to more competitive prices for consumers. This memorandum of cooperation is an important step in the process, and is part of the EU's wider cooperation with Japan in the field of energy,” European Commissioner for climate action and energy Miguel Arias Cañete said.

The memorandum comes days after the two parties signed an agreement on the EU - the Japan Economic Partnership Agreement /Free Trade Agreement and Strategic Partnership Agreement.

“Collectively, Japan and the EU account for nearly 50% of global LNG demand. In close cooperation with the EU, Japan will lead the world’s efforts in enhancing a liquid global LNG market, including the abolishment of restrictive destination clauses,” Japanese minister of economy, trade and industry Hiroshige Seko said.

Recently, Japan’s competition regulator ruled that new LNG contracts should not include destination or other restrictions on buyers. The Japan Fair Trade Commission also ruled that destination clauses in current contracts are acceptable, provided that buyers' diversion requests are not unreasonably refused.

Shardul Sharma