Japanese gas giant JERA has indicated it will seek lower prices for Australian LNG when its contracts expire next decade, citing “fierce competition” from new projects in Qatar and the US.
Hitoshi Nishizawa, JERA’s senior vice president for liquefied natural gas (LNG), highlighted that Qatar is already expanding its production, and the United States, under President Trump, is expected to follow suit.
Nishizawa pointed out that unlike Australia, the US has abundant gas supplies, lower costs, and faster approval processes, which could lead to cheaper LNG.
Nishizawa made these comments during the Energy Exchange oil and gas conference in Perth, hosted by the Western Australian government on Tuesday.
“Some key contracts for Australian LNG will end at the same time that cheaper gas supplies are entering the market,” he said. “As a result, Australian LNG will face tough competition from other global suppliers.”
In addition to lower prices, Nishizawa is seeking more flexible terms in JERA’s Australian contracts. This includes the ability to take delivery of LNG in Australia (free on board) and no restrictions on where the gas can be sent. This flexibility would align with the growing trend for Japanese gas buyers to become traders.
In the 2023 fiscal year, Japan resold 37% of the LNG it purchased, a significant increase from 16% five years ago.
JERA, a major player in the LNG market, sources fuel and generates power for Japan’s electricity utilities in Tokyo and Chubu. The company handles around 35 million tonnes of LNG annually, with about 40% coming from Australia. JERA holds stakes in all Australian offshore LNG projects, except the North West Shelf and Prelude.
The first Australian LNG contract JERA will be able to renegotiate is with the Japanese company INPEX, for supply starting in 2033. The next major contract up for renegotiation is with Chevron’s Wheatstone project, starting in 2037.
Nishizawa’s forecast of a more competitive LNG market follows a recent prediction by Shell, one of the world’s largest producers, which expects LNG demand to increase by 60% by 2040. However, some critics argue that the low prices needed to capture a larger market share would undermine the significant investment required to produce and liquefy the gas.
Nishizawa also reiterated common requests from the gas industry, such as reducing regulations, speeding up approval processes, and encouraging government support for carbon capture and storage.
He also mentioned that Japanese confidence in Australia was shaken by the retrospective application of the safeguard mechanism to gas projects, adding that JERA had bought a 12.5% stake in Santos’ Barossa LNG project in December 2021—five months before the current Australian government was elected with a platform focused on cutting emissions in line with the Paris Agreement.
For Japanese companies to have lost confidence, Nishizawa suggested, they must have expected Australia to avoid complying with international climate agreements.
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