The Japanese Fair Trade Commission (the anti-monopoly regulator) has completed a formal investigation on LNG contracts destination clauses and fair competition issues.
The FTC has then ruled that all new LNG contracts must not contain restrictions regarding the resale of cargoes. From now on, when LNG sellers conclude a new contract or revise a contract after expiration, they should not provide any competition-restraining clauses or implement measures which lead to the restrictions of resale. As for the current LNG contracts, LNG sellers will have to at least review competition-restraining practices which prevent resale.
This decision is a landmark and overturns the previous situation, where Japan's LNG buyers needed to provide details on contract requirements in order to prevent the reselling of LNG to third parties.
This new ruling adds momentum for the liberalization of the market and is expected to increase the volume of cargoes trading in Japan, which is the largest LNG importer. It was long-awaited since LNG buyers such as JERA, KOGAS or CNOOC have been asking for more flexible contracts, in particular regarding the former destination clauses which restricted them from swapping or reselling the cargoes.
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