Japan’s LNG resales set new records despite looming oversupply in global markets

Meanwhile, the country’s domestic consumption of LNG marginally increased but has fallen by nearly 20% since FY2018, according to the latest LNG handling survey of 30 companies conducted by the Japan Organization for Metals and Energy Security (JOGMEC).

Due to declining LNG consumption at home, Japanese energy companies and trading houses are increasingly targeting overseas markets, aiming to capitalise on arbitrage opportunities and develop long-term relationships with customers abroad. The latest JOGMEC survey shows that 40% of all LNG volumes handled by Japanese companies are sold elsewhere, up from just 16% in FY2018.

Yet Japanese companies and policymakers have persistently lobbied foreign governments to facilitate the development of upstream gas production and LNG export projects, citing energy security concerns.

Recent research by InfluenceMap, for example, highlighted Japan’s significant role in promoting Australian LNG exports. In the US, Japanese officials consistently opposed the Biden administration’s pause on new LNG export facilities, claiming it would undermine the stability of Japan’s energy supply.

While Japanese companies often insist that investments in new gas and LNG infrastructure bolster energy security, the rapid growth of external trade and falling domestic demand suggest that these investments are designed to expand fossil fuel trading opportunities overseas.

The Institute for Energy Economics and Financial Analysis (IEEFA) first highlighted the growth of Japan’s LNG resales in a March 2024 report, which found that the country’s major gas and power utilities were purchasing more LNG on long-term contracts than was necessary to meet declining domestic demand. Instead, companies were actively developing markets in South and Southeast Asia by investing in downstream infrastructure and pivoting corporate strategies to target growth abroad.

A subsequent IEEFA report in May 2025 found that Japanese companies resold between AUS$11 – AUS$14 billion worth of Australian LNG in 2024, with profits likely exceeding AUS$1 billion.

The latest JOGMEC survey reveals that in FY2024, Japanese LNG resales were approximately 1.7 times Japan’s total direct imports from Australia, its largest LNG supplier. Resales amounted to around four times the volumes purchased from Malaysia, Japan’s second-largest LNG supplier.

Japan resold more LNG to other countries in FY2024 than the total volume of LNG produced in Russia, the world’s fourth-largest LNG exporter.

Rising competition and margin risks for Japan’s LNG resellers

Nuclear restarts and the uptake of renewables in Japan are expected to further reduce LNG demand in the coming years. Consequently, Japanese energy companies are likely to play an even more active role as LNG traders. The country’s 7th Strategic Energy Plan envisions demand falling to as low as 53 million t by 2040 – a 20% reduction from current levels.

In March 2026, Tokyo Electric is expected to officially restart the 1.35 GW sixth reactor at its Kashiwazaki-Kariwa facility, the world’s largest nuclear plant. This alone could displace 1 million t of LNG demand. Another 1.1 GW facility aims to complete safety work by December 2026.

Despite falling demand, the Japanese government continues to encourage LNG procurement. For example, the Ministry of Economy, Trade and Industry (METI) instructs companies to procure a combined 100 million tpy of LNG. Targets for Japan’s energy self-development ratio, a metric for Japanese ownership of overseas oil and gas production, advise companies to take controlling stakes in fossil fuel projects abroad.

As a result, Japanese companies continue to procure more LNG on long-term contracts. Over the past year, Japanese companies signed over 10.5 million tpy of new sales and purchase agreements, with several of the deals extending beyond Japan’s 2050 net-zero target.

Most of the new deals are with US producers, due to the inherent flexibility of US contracts, which allow offtakers to determine the destination market. While traditional LNG contracts impose destination restrictions to prevent resales, Japan’s declining domestic demand increasingly requires such flexibility. According to JOGMEC, 70% of the country’s contracted LNG volumes in FY2035 will not be subject to destination restrictions, up from 25% in FY2015.

In February 2026, power utility JERA agreed to buy 3 million tpy of LNG from QatarEnergy through 2054, marking the largest deal with a Japanese offtaker in a decade. While destination restrictions in Qatari contracts led Japanese buyers to terminate previous deals, this latest agreement likely contains terms for destination flexibility and diversion rights.

Along with signing LNG purchase contracts, Japanese companies have invested at least US$10.8 billion over the last two years in unconventional oil and gas production in the US. In the recent US-Japan trade deal, announced in February 2026, Japan is expected to invest US$33 billion in 9.2 GW of gas-fired power capacity in Ohio, though project details remain limited. Rather than boosting Japan’s energy security, these deals increase exposure to US domestic gas and power markets, providing a hedge against the risk of rising feedgas prices for LNG liquefaction.

Ultimately, the role of Japanese gas and power utilities has shifted from purely end-users of gas to increasingly active LNG traders, putting them in more direct competition with other global suppliers. Declining global LNG prices could lead to lower profits for Japanese resellers. JERA’s net earnings in its Fuel Business segment, for example, have already decreased by 46% since 2022, when global prices were at their peak.

This is particularly true for buyers with contracts linked to the US Henry Hub benchmark, where rising US demand from data centers, LNG export facilities, and other sectors are likely to place upward pressure on prices. Falling global gas prices, combined with rising US feedgas costs, present a high risk of margin erosion for resellers of US LNG.

While some companies are hedging this risk by investing in US upstream gas and power segments, Japanese players intent on becoming LNG resellers may increasingly face the financial consequences of selling more LNG into an oversupplied market.

Read the article online at: https://www.lngindustry.com/special-reports/25022026/japans-lng-resales-set-new-records-despite-looming-oversupply-in-global-markets/