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  5. Final Report of Workshops on Key Drivers to promote the liquidity, Flexibility and Transparency of the Global Liquefied Natural Gas Market Released

Final Report of Workshops on Key Drivers to promote the liquidity, Flexibility and Transparency of the Global Liquefied Natural Gas Market Released

METI and the European Commission (EC) discussed specific efforts for promoting and establishing a liquid, flexible and transparent global LNG market

January 7, 2019

The Ministry of Economy, Trade and Industry (METI) and the European Commission (EC) signed a Memorandum of Cooperation on Promoting and Establishing a Liquid, Flexible and Transparent Global Liquefied Natural Gas Market in July 2017. Under the MOC, they held four workshops and formulated a final report on the results of the workshops.

1. Background

Japan and the European Union account for nearly half of all worldwide LNG imports. In July 2017, METI and the EC signed at the ministerial level a Memorandum of Cooperation on Promoting and Establishing a Liquid, Flexible and Transparent Global Liquefied Natural Gas Market, aiming to implement joint activities for establishing a liquid, flexible and transparent global LNG market in a manner open to all LNG consuming and producing countries.

Under the MOC, from November 2017 to October 2018, METI and the EC held four workshops, bringing together stakeholders from a wide variety of fields, involving the entire LNG value chain, and participants shared best practices and information for the purpose of improving the functionality of global LNG markets and enhancing the ability to respond to emergencies.

2. Key points of the report

Conventional LNG trading contracts (which are long-term, take-or-pay contracts with the pricing system linked to an oil price and destination restrictions) no longer meet the needs of LNG consumers. Meanwhile, consumers still need LNG long-term contracts to secure fundraising for investment in upstream projects, and this represents conflicting needs between consumers and producers. To overcome these issues, METI and the EC concluded that a robust, independent LNG/gas pricing system based on actual trading and more flexible LNG trading based on the LNG/gas pricing system are required. At these workshops, the two sides held discussions on the following topics as others for which further efforts are necessary:

  1. Optimizing the use of contractual flexibility;
  2. Downstream hub-development and liberalized end-consumer markets;
  3. Facilitating LNG transactions and price transparency through trading venues; and
  4. Financing upstream projects in the context of a changing LNG market.

METI and the EC will share the results of the workshops with as many LNG stakeholders as possible. Along with this, the report describes a commitment between METI and the EC for continuous cooperation in creating a flexible and transparent global LNG market.

Appendix

Reference

Division in Charge

Petroleum and Natural Gas Division, Natural Resources and Fuel Department, Agency for Natural Resources and Energy