The Japanese Ministry of Trade has sounded alarm of medium term gas crunch, pointing out that long-term contracts fLNGor liquefied natural gas shipments are sold out until 2026 due to limited liquefaction capacity at a time Europe unplugged from Russian gas pipelines and strengthened LNG demand.
The country which is the world’s leading importer LNG stated that there is a strong battle in the market among Asian and European buyers to secure supplies in the immediate to medium term.
There are no long-term contracts available for LNG shipments before 2026, Japanese companies told the country’s trade ministry in a survey published Monday.
“The LNG procurement environment has changed completely. Procurement can also be said to be in a state of war,” they told the ministry.
A dwindling supply of natural gas worldwide has sent countries racing to secure shipments of the key fuel. The squeeze is due to a lack of investment in LNG export projects, according to the trade ministry.
At the same time, European buyers are set to step up their imports of LNG from next year after Moscow cut off pipeline-borne gas flows to the continent in retaliation to Western sanctions. They have already been in “huge competition” with Asian buyers for exports from Qatar to replace the Russian supplies.
“The global ‘LNG competition’ is likely to heat up further,” the ministry said. Japan is the world’s top importer of LNG, but China is set to overtake it, according to the IEA.
China, which initially provided Europe with additional supply, has halted LNG shipments to the region to make sure its own households have enough gas for the colder months.
On Monday, QatarEnergy agreed a 27-year deal to provide China’s Sinopec with LNG — the longest-term contract ever, Reuters reported.
Europe stands to face shortages in the years ahead, if Russia completely turns off the gas tap, according to Japan’s trade ministry. Should that happen, there will be a global shortage of 7.6 million tons of LNG in January 2025, it predicted.
The gap between global LNG demand and supply is expected to ease in 2026, when planned projects in the US and Qatar are expected to come online.
Until then, given the lack of long-term contracts, importers will be forced to buy natural gas from the spot market at much higher prices. The spot market is currently trading three times higher than long-term contracts, per Bloomberg.