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Japan, the world's biggest buyer of liquefied natural gas ("LNG"), is currently investigating the potential anticompetitive effects of territorial restrictions in LNG supply contracts.
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Japan, the world's biggest buyer of liquefied natural gas
("LNG"), is currently investigating the potential
anticompetitive effects of territorial restrictions in LNG supply
contracts. Historically, LNG suppliers have used long-term
contracts that incorporate territorial restrictions to prevent
Japanese buyers from on-selling the LNG outside Japan. The effect
of such clauses is to ban exports of LNG bought by Japanese
customers. While this may have increased Japanese energy security,
LNG suppliers have benefited from the absence of price arbitrage
between Japan and neighbouring markets. This contractual framework
eliminates the buyers' scope to trade LNG with other countries.
The concern is that such territorial restrictions could now be
resulting in a reduction in trading volumes, liquidity and
increasing buy-side risk.
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