Declining LNG demand in Japan leads to oversupply

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Japan’s utilities face the possibility of decreasing margins due to a surplus of LNG, driven by rapidly declining domestic demand. This situation is prompting Japanese utilities to seek markets abroad for their excess LNG. A report from the Institute for Energy Economics and Financial Analysis (IEEFA) highlights that Japan’s major utilities may have an excess contracted LNG position of around 11 million tonnes annually through this decade. As Japan’s domestic LNG demand drops due to increased nuclear and renewable energy generation, and government climate goals, these utilities are focusing on expanding LNG demand in emerging markets in South and Southeast Asia through investments in gas infrastructure. The report also suggests that Japanese utilities, which have shifted from being major LNG buyers to becoming competitors in the global LNG market, might exacerbate a potential global LNG glut.

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