Japan could lose its pole position as the world’s top LNG importer to China as early as 2022, a new report by Wood Mackenzie showed.
By then, LNG imports in Japan are expected to decline 12% to 72.8 million tonnes per annum (mmtpa) compared to 2018, while China’s import volume would rise 37.5% to 74.1 mmtpa.
“Despite losing this leadership position, Japanese buyers will continue to take a lead in contracting innovation with developments such as hybrid deals, coal indexation, joint procurement and carbon neutral cargoes,” the report said.
As several long-term contracts wind down from the early 2020s and with gas and power market liberalisation underway, this innovation will provide buyers more leverage and opportunities in future contracting discussions.
“While LNG demand is declining, Japanese imports will remain above 70 mmtpa through much of the 2020s. It will remain the second largest LNG consumer in the world until at least 2040, with demand still exceeding 60 mmtpa. As such Japan still provides ample opportunities for LNG sellers, particularly as existing contracts expire,” Lucy Cullen, senior analyst, said.
“The decline in Japanese imports will be driven by competition from coal, nuclear and renewables in the power sector and slow macroeconomic growth.”