Japan and the EU Initiate Significant Changes at Global LNG Market

Aug 7th, 2017

The EU and Japan consume near a half of the global LNG supply. The European Commission (EC) has announced the decision of the two regions to work in a joint effort to develop a global LNG market.

First, the parties are boosting cooperation in the area of energy security. Japan and the EU have signed the memorandum on cooperation which suggests the development of the flexible, transparent and liquidity LNG market. In addition, being concerned about unexpected gas delivery interruptions at the global market, the parties came forward with the initiative to improve the coordination between international companies on this issue.

Geographically, Eastern and Western Europe are close to the Russian Federation which evidently makes Russia the major energy supplier among the rest regions. For example, almost 80% of the Russian gas is delivered to Western Europe and 20% go to central European consumers. However, a number of serious geopolitical changes and different political views prompt Europe to diversify its energy sources together with their transportation routes.

In this light, one of the recent EU decisions is the increase of LNG consumption. Europe seriously intends to consume bigger amounts of this fuel throughout the whole territory. This strategy implies the development of the LNG market which will result in diversified gas supplies to European countries and strengthen the energy security in the region. The EC experts are sure that the improved LNG infrastructure will increase its consumption as well as make the prices for this fuel more competitive.

As for Japan, it is the major LNG exporter in the world. Thus, both Japanese and European market players hope to get significant benefit from this partnership including best practices exchange at the LNG market and new transparent gas trading contracts. Moreover, the parties plan to create new hubs at consumer markets.