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Japan encourages further action regarding LNG destination clauses

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LNG Industry,

According to Reuters, Japan’s trade ministry has advocated for the re-working of current LNG supply contracts to remove restrictive destination clauses. Such clauses were deemed to be ‘anti-competitive’ by Japan’s anti-monopoly last year.

Despite the ruling in June last year, which many officials thought would force the renegotiation of billions of dollars of existing LNG contracts with Japanese buyers, LNG suppliers have been very slow to take any action regarding the clauses. In light of this, the trade ministry has now presented a ‘model diversion clause’ for supply contracts at an annual conference in Nagoya.

The extent of the issue was made clear to Reuters by one lawyer attending the conference: “no-one has struck out a destination clause on the basis of the ruling, as far as I’m aware”.

It is clear that much still to be done to combat the problem of restricted destination clauses for LNG shipments to Japan. While new LNG supply contracts now rarely include such clauses, it would appear additional measures will need to be taken to encourage the re-negotiation of existing contracts, in order to outlaw the clauses entirely.

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