The “Japanese model” of using liquefied petroleum gas (not) for the European Union?
By Marek Grzybowski
The “Action Plan for Affordable Energy” was recently submitted to the European Parliament. In this plan, a team of experts from the European Commission proposes adopting a “Japanese model” of investment in liquefied natural gas (LNG), which is to encourage foreign direct investment in LNG export projects and coordinate joint purchases by European importers.
The “Japanese model” of investment in LNG will not work in Europe,” say Sam Reynolds and Christopher Doleman from the Institute for Energy Economics and Financial Analysis (IEEFA). To what extent Japanese solutions will work in the EU and in the Polish FSRU terminal, we will soon find out.
The European Commission precisely states that it is necessary to “explore possibilities beyond demand aggregation and look at other approaches (e.g. the Japanese model)”. It is about effectively “using the EU’s purchasing power to better manage imported natural gas”. This is a very urgent task and should therefore be completed in the first half of 2025.
Źródło: Banchro Costa, 2025
It is assumed that already this year, “By offering EU buyers better opportunities to secure LNG supplies under long-term contracts, they can be protected from price volatility and provided with access to lower prices, thus limiting them to the levels observed on global markets”. It is emphasized that “Protecting EU buyers from fossil fuel price volatility could lead to a significant reduction in retail prices in the short term”.
This is just one aspect of a plan covering a whole range of actions aimed at “reducing energy costs, completing the Energy Union, attracting investment and better preparing for potential energy crises” – the European Commission states in a press release. Actions related to reducing the cost of gas supplies are extremely important. Investments in gas terminals are capital intensive and may turn out to be unprofitable. Deutsche ReGas found out about this when it terminated its charter agreement for FSRU with the German government. The reason was the “ruinous pricing policy” of government-controlled competition, said the only private operator of LNG terminals in Germany.
Japan’s LNG strategy
However, Japan’s approach to LNG investment is very complex and expensive, requiring significant public support and numerous entities throughout the LNG value chain. As LNG demand in Japan declines, Japanese companies are investing in new supplies while also expanding their commercial activity on the international market. Private companies are strongly supported by the government and its institutions. Technological potential, the organization of a project network and the resale of surplus LNG are supported by well-organized marketing of complete installations.
Operating on the international market places Japanese LNG companies in the area of “downstream segments of the supply chain and exposes companies to uncertain cash flows compared to the regulated returns in the domestic market in Japan,” note Sam Reynolds and Christopher Doleman, researchers specializing in the LNG market at the Institute for Energy Economics and Financial Analysis (IEEFA).
Source: Banchro Costa, 2025
– Europe may face greater challenges in marketing LNG abroad as its own demand falls. Resources could instead be better spent on reducing gas demand and accelerating clean energy technologies, rather than investing in LNG that would merely secure long-term exposure to fossil fuels, Reynolds and Doleman say.
They note that “there is no one-size-fits-all model for Europe.” Indeed, the European Commission notes that “improving coordination between Member States and making filling trajectories more flexible can, with the Commission’s support, help to reduce the pressure on the system and avoid market disruptions associated with gas replenishment, enabling replenishment on better terms and supporting security of supply.”
The European Commission’s recent Action Plan for Affordable Energy proposes states that “By aggregating demand and adopting a joint purchasing strategy in accordance with competition rules, EU buyers can leverage their collective economic leverage, strengthen their negotiating position and negotiate better terms with suppliers.” European Commission experts say that “This approach has also been adopted by Japan, which has long pursued a policy of supporting investments in export infrastructure in countries producing liquefied natural gas (LNG)”.
LNG amalgam
Another perspective on Japan’s “gas policy” comes from analysts at the Institute for Energy Economics and Financial Analysis. Reynolds and Doleman note that, “Rather than a single LNG investment plan, Japan’s approach is an amalgam of policy directives, financial leverage, and energy security incentives that have evolved over seven decades.”
They argue that, “These tools support the entire LNG value chain, not just export projects. More robust markets improve the country’s access to abundant LNG supplies, but also to demand centers where Japan can resell surplus LNG.”
Indeed, Japan’s LNG sales to foreign markets reached a record high in fiscal 2023, while domestic demand for imported liquefied natural gas plummeted by 8%.
Japanese companies resold a record amount of liquefied natural gas to overseas markets in fiscal 2023, according to a new survey of 30 companies by the Japan Organization for Metals and Energy Security (JOGMEC). LNG resales reached 38.25 million tonnes (mt) in fiscal 2023, which runs from April to March, surpassing the previous record of 38.11 mt in fiscal 2021.
Source: Banchro Costa, 2025
During this period, Japan’s LNG demand fell to 64.89 mt, down 8% compared to fiscal 2022. Data from the Japanese Statistical Office show that 37% of the total volumes handled by Japanese companies were resold in fiscal 2023. Marine gas terminals were therefore operating at a much higher rate than five years ago, when LNG re-exports had only a 16% share.
Until recently, Japan was the world’s largest LNG importer, but falling demand due to the restart of nuclear power plants and the planned development of renewable energy sources in the country has led the largest LNG importers to focus on re-exporting it. The IEEFA published a report in March 2024 detailing these trends, which have significant implications for the global LNG industry.
Although demand in Japan is falling, government policies are supporting importers to maintain current levels of total LNG import transactions and maintain influence over operations in international markets, each with its own specifics. The European Union is also in the spotlight. The International Resource Strategy of Japan’s Ministry of Economy, Trade and Industry (METI) actually requires companies to continue handling at least 100 million tons of LNG per year.
Source: IEEFA, 2025
Gas financed from the budget
Public financial institutions have been legally obliged to join in activities activating the trade in liquefied gas and investments related to the construction of facilities outside Japan. The Japanese Bank for International Cooperation (JBIC) is in the forefront. Companies are supported by the Japan International Cooperation Agency (JICA) and the Japan Organization for Metals and Energy Security (JOGMEC).
They provide marketing support and, above all, financing and technical assistance. No one hides the fact that it is about supporting Japanese interests abroad. Nippon Export and Investment Insurance (NEXI) provides insurance and guarantees to Japanese companies in foreign transactions related to the construction and installation of facilities using LNG.
Japan is considered one of the largest suppliers of public finance for fossil fuels. Over the past decade, the country’s public financial institutions have allocated $56 billion to foreign gas projects, mainly through loans and guarantees. JBIC has been a leading provider of loans, providing almost $19 billion for gas and LNG projects since 2016.
Source: Banchro Costa, 2025
Public financing is helping to lower the threshold for fossil fuel investments, encouraging private Japanese companies and banks to participate in LNG projects alongside publicly backed insurance, guarantees, loans and equity investments. Three Japanese megabanks — Mitsubishi UFJ Financial Group, Mizuho and SMBC Group — are among the world’s five largest financiers of LNG projects, providing more than $27 billion between 2021 and 2023.
Japan’s Ministry of Economy, Trade and Industry (METI) has set a target for Japanese operators to transact at least 100 million tonnes per annum (mtpa) of LNG, a leading target for operations in the market by 2030. The government has set this target for Japanese companies even though domestic LNG demand in Japan has fallen by 25% since 2014. This means that Japan will be the source of supply in the global LNG market.
“The Japanese model” – demand falls, prices rise
The Japanese model of operating on the LNG market seems very attractive. However, Sam Reynolds and Christopher Doleman from IEEFA believe that the “Japanese model” will not make LNG cheap in the European Union or stabilize prices”. The researchers emphasize that “Japan’s LNG strategy has been developing for decades and has included significant financial support from the public and private sectors”.
They believe that adapting this model will require significant expenditure, and the effects may turn out to be economically inefficient. In addition to spending on the development of the LNG logistics chain, Japan spent USD 41 billion on LNG imports in 2024, compared to USD 30 billion in 2016. LNG import spending in Japan increased despite falling demand and the activity of Japanese LNG operators on the global market.
Source: nippon.com
Long-term LNG contracts offer Japan protection from spot market volatility. But customs data shows that its LNG import bill has risen to more than $64 billion in 2022, amid turmoil in the liquefied natural gas market following Russia’s invasion of Ukraine. For Japan, the price spikes in the LNG market have been devastating, leading to a record trade deficit.
Japan’s trade balance in the 2024 calendar year is expected to be nearly 5.5 trillion yen short, marking the country’s fourth consecutive year of trade deficit, Japan’s finance ministry said. Total exports rose 6.2% to 107.1 trillion yen, the highest level since comparable statistics were first compiled in 1979.
That was driven by a rise in exports of semiconductor manufacturing equipment and other items, particularly to China, and higher exports of cars due to price hikes and a weak yen. Meanwhile, imports rose 2% to almost 112.6 trillion yen, Japan’s finance ministry said.
Japan’s 2024 trade deficit with Australia, from which it imports about 26 million tons of LNG annually, was 174 billion yen in January and 183 billion yen in January 2025. That is part of a wider 5.3 trillion yen trade deficit for Japan in 2024, down 44% from 2023, according to OEC World. Japan had a trade deficit of more than ¥7 trillion with Australia in 2023. This is due to a number of factors, including imports of gas, nonferrous metals and meat.
As a result of its heavy reliance on LNG, household electricity prices in Japan are reportedly more than twice the average for the whole of Asia. As domestic LNG demand has fallen, Japanese companies are investing in new supply while developing trading segments and relationships with key LNG growth markets across Asia. “This shift is risky, exposing Japanese traders to an impending global oversupply,” warn Reynolds and Doleman.
Despite this turmoil, Japan has continued to expand its gas production. Tokyo Gas recently expanded into the U.S. shale gas market through a deal with Chevron, reports Banchero Costa. TG Natural Resources LLC (TGNR), jointly owned by Tokyo Gas and Castleton Commodities International, has purchased a 70% interest in the East Texas gas assets from Chevron for $525 million, management said. TGNR is the fourth-largest producer in the Haynesville shale region. The deal will create synergies based on the development of assets valued at more than $170 million, Craig Jarchow, president of CCI Upstream at Castleton Commodities International LLC, said in a statement.
Source: IEEFA, 2025
They assume that Europe may face even greater challenges in marketing LNG abroad as its own demand declines, given the costs and complexity of approaching the full value chain in Japan.” They argue that “resources could be better spent supporting existing efforts to reduce gas demand and accelerate clean energy technologies, rather than on LNG investments and contracts that would merely secure long-term exposure to fossil fuels.”
Polish FSRU with Japanese and Turkish contributions
A year ago, GAZ-SYSTEM signed a charter agreement specifying the terms for the delivery and operation of an FSRU in the Gulf of Gdansk. The contract was concluded with White Eagle Energy Ltd., a company from the Mitsui O.S.K. Lines group.
Source: EUROSTAT, 2025
– The FSRU terminal is a strategic investment that will allow us to meet the most urgent needs related to ensuring the diversification and security of natural gas supplies to both Poland and the region. This is expressed by the allocation of funds from the KPO under the REPowerEU program for the construction of the onshore part of the FSRU. The contracting of the LNG storage and regasification unit by GAZ-SYSTEM is another important stage of this project – said Maciej Bando – Government Plenipotentiary for Strategic Energy Infrastructure in April 2024.
– By signing the TCP agreement, we have achieved an important milestone. On this occasion, I would like to express my appreciation for the commitment and effort put into this process by both parties. Mitsui O.S.K. Lines appreciates the opportunity to contribute to increasing Poland’s energy security. I believe that this agreement will allow Mitsui O.S.K. Lines to use its extensive experience and knowledge from implementing such projects around the world – said Toshinobu Shinoda, Managing Director of Mitsui O.S.K. Lines, responsible for Europe and Africa, a year ago, informs GAZ-SYSTEM.
The FSRU vessel will have a capacity of a standard LNG tanker of 170 thousand m3 of liquefied gas. It will have an installation for regasification of approximately 6.1 billion m3 of natural gas per year. The ship’s systems for regasification of liquefied natural gas will have a nominal capacity of not less than 783.5 thousand m3/h. The contract was concluded for a period of 15 years with the possibility of further extension. On the basis of the charter agreement, GAZ-SYSTEM also secured the right of first refusal to purchase the FSRU vessel. The vessel will be built by the South Korean shipyard HD Hyundai Heavy Industries.
The contractor of the marine part of the FSRU Program in Gdańsk will be a consortium consisting of: GAP INŞAAT YATIRIM VE DIŞ TİCARET A.Ş. as the Leader, UNITEK İNŞAAT SANAYI VE TICARET A.Ş. and FABE POLSKA SP. Z O.O. The general contractor from Turkey will be responsible for preparing the detailed design, supplying machinery and equipment, and constructing the marine part of the FSRU. The consortium’s tasks include constructing a berthing and mooring quay with the infrastructure necessary to service the FSRU vessel and constructing an offshore gas pipeline that will connect the terminal with the national transmission system.
At the beginning of April, GAZ-SYSTEM announced that the remaining elements of the FSRU Program are already being implemented, i.e. the construction of onshore gas pipelines. They will transmit gas on three routes: Kolnik – Gdańsk, Gardeja – Kolnik and Gustorzyn – Gardeja.