Japanese Energy Companies Rake In $1 Billion from Reselling Australian Gas: Analysis

This comes as Australia is expected to face a potential gas shortage and may need to import gas within the next two years.

A liquefied natural gas (LNG) tanker arrives at a gas storage station in Chiba prefecture, Japan, on April 6, 2009. STR/JIJI Press/AFP via Getty Images

A U.S.-based think tank is calling on the Australian government to investigate Japanese energy companies’ reselling of Australian gas.

This comes as Australia is expected to face a potential gas shortage within the next two years.

A new analysis by the Institute for Energy Economics and Financial Analysis (IEEFA) revealed that Japanese companies are raking in up to $1 billion (US$645 million) from on-selling vast amounts of Australian liquefied natural gas (LNG).

The IEEFA estimated that Japan resold between 11.3 and 14.7 million tonnes, or 627 and 812 petajoules, of Australian LNG to other countries in 2024.

This amount is roughly equivalent to half of the total volume of gas Japan imported from Australia, and 1.2 to 1.6 times the total domestic gas consumption of Eastern Australia.

“With Japan’s domestic gas use steadily declining, LNG importers there have discovered a lucrative side hustle in this third-party trade,” said IEEFA’s Australia team CEO Amandine Denis-Ryan and IEEFA lead analyst Josh Runciman.

“Last year alone, IEEFA estimates Japanese companies resold $11 billion to $14 billion of Australian LNG with profits likely exceeding $1 billion.”

Australia is Japan’s Largest Source of Resold LNG

The IEEFA also found that Australia is currently Japan’s largest source of resold LNG, followed by the United States.

Around 41 percent of Japanese-chartered LNG shipments sold to third countries came from Australia, 38 percent from the United States, 2 percent from Qatar, and 19 percent from other nations.

It is worth noting that Qatar produces a similar amount of LNG as Australia and the United States.

The IEEFA said the strong restrictions in Qatari LNG contracts were likely the reason for the small volume of Japan’s resold LNG from this country.

“With such a large volume of Australian LNG being purchased and resold by Japan, the profit on those resales is likely a key driver for Japan’s interest in the Australian energy market,” Denis-Ryan and Runciman said.

“This is evidenced by the fact that the total volume of Australian LNG shipments going to Japan (26.4 million tonnes) equals the total volume of contracts (26.6 million tonnes), showing resales are not due to contract surpluses.”

The IEEFA’s analysis comes as a recent gas inquiry report showed that Australia’s southern states could face “structural shortages” by 2027 and might need to import gas to meet demand.

The Australian Competition and Consumer Commission said the shortages will be caused by the depletion of traditional supply sources in the east coast market, unless new sources are developed.

A gas burner is seen in Melbourne, Australia, on July 28, 2023. Alfred Bui/The Epoch Times

Japan’s LNG Reselling Could Harm Australia’s Interest: IEEFA

The IEEFA also pointed out that the practice of reselling LNG by Japanese companies could harm Australia’s interests.

According to the think tank, over two-thirds of Japan’s resold LNG was shipped to Taiwan and South Korea.

Both are high-value markets for Australian gas producers with high purchasing power and low credit risk.

Data from the government indicated that in 2023, Australian LNG was sold for $979 and $1,086 per tonne at the Taiwanese and South Korean markets, respectively, compared to the average export value of $921 per tonne.

“The Australian government should scrutinise Japanese companies’ resales of Australian LNG, how they affect Australia’s gas markets and how they compete with Australian producers,” Denis-Ryan and Runciman said.

“It would also be worthwhile to examine the motives behind the Japanese government’s persistent attempts to exert influence on Australian energy policy.”

Japan’s Interest in Australia’s Energy Policies

In 2023, former Japanese Ambassador to Australia, Yamagami Shingo, wrote to Australian ministers, politicians, and peak industry bodies to emphasise the importance of maintaining stable gas and coal supplies to Japan.

The ambassador warned that the neon lights of Tokyo would go out if Australia stopped supplying energy to Japan.

In the same year, Japanese Consul-General Tokuda Shuichi wrote a letter to express concerns about the coal reservation measure introduced by the New South Wales government, which Japanese companies believed could reduce coal exports to the country.

Prior to that, Yamagami criticised the coal royalty tax hike introduced by the then-Queensland government in 2022, warning it could push away Japanese investors and undermine the relationship between the two countries.