IEEJ：October 2017○ｃIEEJ 2017

Special Bulletin
A Japanese Perspective on the International Energy Landscape (346)

October 19, 2017

LNG Producer-Consumer Conference 2017
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn October 18, the LNG Producer-Consumer Conference 2017 took place at Shintakanawa
Grand Prince Hotel in Tokyo. The annual conference has been sponsored by the Japanese Ministry ofEconomy, Trade and Industry and the Asia Pacific Energy Research Center since 2012. A total ofmore than 1,000 people participated in the latest or sixth one on a registration basis. Among theparticipants were 15 energy minister-level representatives from liquefied natural gas producing andconsuming countries, including Japanese Economy, Trade and Industry Minister Hiroshige Seko andQatari Energy Minister Mohammad bin Saleh al-Sada who delivered opening remarks. In addition,LNG industry leaders and globally famed LNG experts attended the conference as speakers ormoderators. Vigorous discussions came at the conference divided into five sessions. The following
summarizes the conference’s key points that were impressive to me:First, various stakeholders have made steady progress in deepening discussions toward thesound development of the LNG market. As noted in “A Japanese Perspective on the International
Energy Landscape (299),” LNG consumers and producers had differed over market conditions inearly LNG Producer-Consumer Conferences. At present, however, they share a view that LNG
supply will remain excessive until the beginning of the 2020s. With such common view, LNG
producers and consumers are deepening discussions on what challenges exist in regard to the sounddevelopment of the LNG market and what should be done for the sound development.
Great expectations have been placed on LNG as clean energy backed by high supply potential.
It is very important for the consumer side to realize the expectations. It is also significant for thesupplier side in regard to the expansion of the market and sales outlets/revenues. Discussions at theconference focused on what actions LNG producers and consumers should take to achieve theircommon goal of overcoming various challenges in expanding the size/volume of global LNG market.
As a matter of course, it is the actual “market players” who are required to take such actions to tackledifficult challenges. And it is also important to note that taking actions to overcome the problems islikely to take longer time. However, it is very significant that the LNG producer-consumer
conference has actually begun to discuss more concrete measures for market expansion while
making these measures more feasible. It may be needless to say that discussions at the conference
are important. Given that the conference attracts a large number of leaders of various stakeholders in
the world, however, it is significant for the conference to provide opportunities for participants tohave private discussions including business talks.
Second, participants in the conference clearly focused on LNG market problems in Asia as a1

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driver of global growth in discussing how to develop the global LNG market. A participant forecast
that Asian LNG demand could more than double by 2030. Great expectations are placed on growthin emerging LNG markets including China, India and ASEAN countries. As their economies growwith environmental regulations enhanced, emerging countries’ LNG demand is likely to steadily
increase. In emerging countries, however, LNG faces competition from cheap, abundant coal as well
as renewable energy for which generation costs have rapidly been reduced. LNG is required toenhance its competitiveness to allow emerging countries to achieve their expected growth. It is also
indispensable for emerging countries to develop LNG infrastructure for expanding their LNG
markets. In Japan, South Korea, Taiwan and other traditional, relatively mature LNG markets,energy mix policies have affected LNG demand, making future LNG demand uncertain. The extent
and pace for Asian LNG market expansion are the most important for foreseeing the future global
LNG market. This point will remain the biggest matter of interest at future meetings between LNG
consumers and producers.
Third, it was interesting to see discussions at the conference on what roles Japan and the UnitedStates should play in developing the Asian LNG market. A major change since last year’s LNG
producer-consumer conference is the inauguration of the U.S. Trump administration that emphasizes
fossil fuels and gives priority to taking maximum advantage of LNG and other energy exports forU.S. national interests. Remarkably, discussions came on what roles U.S. LNG could play indeveloping the Asian LNG market and what U.S. LNG should do to play such roles more effectively.
In this regard, the Institute of Energy Economics, Japan, and the Energy Policy Research Foundation
Inc., a U.S. think tank, introduced achievements of their joint study titled “The Future of AsianLNG.” Reports were made on policies that Asia and the United States should take to allow U.S. LNG
to play its expected roles in the Asian market. In another major development seen in the conference,
Japan, the host of the conference and the largest LNG consumer in the world, announced financial
support worth 1 trillion yen for promoting the development of the Asian LNG market and a program
to foster LNG-related human resources (capacity building).
Fourth, multiple sessions were designed to deepen discussions on what would allow LNG to be
more preferred in the Asian market and to enhance its overall competitiveness. Session 3 under thekey word of “Innovation” dealt with the importance of technological innovation for overall LNG
supply chains, as well as that of marketing and market approach innovation. Interestingly, Session 4
focused on LNG as a potential fuel for shipping and relevant challenges. Session 5, in which I served
as a moderator, covered how LNG market flexibility and liquidity should be enhanced along withmarket functions to improve LNG’s overall attractiveness and competitiveness. Last June, the Japan
Fair Trade Commission released a report alleging that the destination clause in LNG contracts could
run counter to the Antimonopoly Act, attracting attention from LNG stakeholders in the world. How
this problem would be treated in Asia is a key point when flexibility and liquidity are considered forthe whole of the Asian LNG market. Discussions also came on how power and gas market
deregulation implemented in Japan and planned in the rest of Asia would influence the flexibility of
the LNG market and how price discovery and reporting functions should be improved to establish
well-functioning LNG market. Interestingly, participants argued that initiatives in this regard would
be very important for developing the LNG market and that such initiatives should be enhanced
further in the future.

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At the closing remarks of the conference, it was announced that JERA will serve as a chieforganizer of the next LNG Producer-Consumer Conference to be held in Nagoya. The next meetingis expected to further deepen discussions to develop the Asian LNG market.

Contact: report@tky.ieej.or.jp
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